Egypt: Coptic Christians

Baroness Cox: asked Her Majesty's Government:
	Whether they will make representations to the Government of Egypt about the recent attacks on Coptic Christians.

Lord Triesman: My Lords, the Government share the noble Baroness's concern about recent incidents in Egypt. Following the events in Alexandria between 14 and 16 April, our embassy in Cairo discussed the matter with the Egyptian Government on 22 April. The Egyptian Government have confirmed that an investigation into the events is being conducted. Some arrests have been made.
	Coptic Christians form a large minority in Egypt. Since the events in Alexandria, the Egyptian Government have publicly reaffirmed the importance that they attach to promoting tolerance and understanding between the Coptic and Muslim communities.

Baroness Cox: My Lords, I thank the Minister for that encouraging and sympathetic response. Is he aware that the attacks on the churches in Alexandria to which he referred were not isolated incidents but part of a trajectory of increasing violence and discrimination against Christian and other religious minorities in Egypt? Will Her Majesty's Government urge the Egyptian Government to ensure freedom of religious practice for all their citizens in accordance with their obligations as a signatory to the Universal Declaration of Human Rights?

Lord Triesman: My Lords, I can confirm the facts that the noble Baroness has mentioned. There were also attacks on 19 and 21 October last year. The Egyptian constitution states that all Egyptian citizens should be treated equally, regardless of religion. It is therefore important that provision is made for all Egyptian citizens to receive exactly equal treatment in all social and political respects, and we will of course urge that.

Lord Renton: My Lords, will the Government explain to the Egyptian Government that in this country we pride ourselves on being open-minded towards people of other religions and that we tolerate their existence here?

Lord Triesman: My Lords, I hope that this country sets a good example for religious tolerance without any of us having to go round wagging our finger at others. However, in areas where the traditions and the history are different, we try to bring about the fullest engagement in human rights in religious matters, as in others, because we believe that there should be full equality of citizenship in that respect.

The Lord Bishop of Norwich: My Lords, is the Minister aware that Egyptian identity cards have a section on religion that is often used as a basis for discrimination? Not just Christians but the Baha'is and converts from Islam either find it difficult to register or, having done so, find that they are subject to discrimination as a result of that declaration. Will the Government urge the Egyptian Government to remove that section from their ID card, always assuming that the Government do not intend to introduce such a novelty here?

Lord Triesman: My Lords, the right reverend Prelate is right to point out that one impact of the new Egyptian identity card system is that citizens who are not Muslim, Christian or Jewish will not be entitled to an identity card and may therefore suffer from a lack of access to public services. For that reason, it is important that provision is made for all Egyptian citizens to receive an identity card. We urge that on the Egyptian Government. We have no plans for such a designation in the United Kingdom, and I take it that the point was made in jest.

Baroness Symons of Vernham Dean: My Lords, although the attacks are deplorable, does my noble friend agree that the Egyptian Government have made some efforts with regard to the position of Coptic Christians? In the past two years, we have seen the elevation of Coptic Christians to positions of real influence in the Egyptian Government. I am thinking in particular of the finance minister—the counterpart of our own Chancellor of the Exchequer—who is a Coptic Christian.

Lord Triesman: My Lords, I confirm that, and I confirm that the Government of Egypt and the police have intervened when attacks have taken place. To add to the information that my noble friend has just provided, the president has the right to appoint 10 additional Members to Parliament and has recently used that power to appoint five more Coptic Christians, thus improving the overall ratio of Coptic Christians in the Egyptian Parliament.

Lord Howell of Guildford: My Lords, does the Minister agree that attacks on Christians for being Christians are deplorable anywhere—not only in Egypt but in any country where intolerance towards religious beliefs is shown? As my noble friend Lord Renton reminded us, we would take the same view about attacks on Muslims here for being followers of Islam. Will the Minister convey to the Egyptian Government, and, indeed, other Islamic governments, that if we are to see the treasured, co-operative and valued side of Islam—many people want to see the gentler side of it—their governments and the religious leaders of Islam should pay much more attention to preventing attacks on Christian people for being Christians anywhere in the world?

Lord Triesman: My Lords, I know that not just the Government but all opposition parties in your Lordships' House deplore attacks on people because of their religious beliefs; I take that as a given. The point is made widely, and it must concentrate our attention and resources on the outreach work between different religious communities that we can promote as a department and a government. That is very important. Mutual understanding comes as a result of a dialogue in which I suspect no religion should claim that it makes no attacks on members of other religions. Were that to be the case, we would be in a much better world.

Baroness Williams of Crosby: My Lords, the drift of the questioning suggests that there may be non-recognised forces that are making life hard for the Coptic Christians, who are a crucial part of Egypt's heritage. Given the extraordinary control that President Mubarak exercises over his country, is the Minister persuaded that the Government of Egypt are doing everything that they can not only to stop the attacks but to ensure that no private group of militia or other people mount attacks that are not then immediately stopped by the highly trained, very effective and tough Egyptian police?

Lord Triesman: My Lords, we have encouraged the Egyptian Government to ensure that they take every step to arrest the perpetrators of attacks and bring them to proper justice. There is some evidence that a big effort is being made to do that. For my part, I do not accept that it is wholly convincing that the most recent attacks were the acts of "one psychologically deranged individual". For those reasons, we must carry on pressing the point.

EU: Economic and Financial Affairs Council

Lord Dykes: asked Her Majesty's Government:
	What principal subjects they raised at the European Union ECOFIN council on 5 May.

Lord McKenzie of Luton: My Lords, the council adopted conclusions on three financial services items, adopted a contribution to the review of the EU sustainable development strategy, and heard presentations by the Commission on the preliminary draft general budget 2007 and the action plan for an integrated internal control framework. Ministers discussed a package of measures relating to VAT, including on place of supply. The council will return to that topic at the June ECOFIN. The Paymaster General, Dawn Primarolo, represented the UK.

Lord Dykes: My Lords, I thank the Minister for that detailed reply. Could the Government not have made more effort despite their present disarray to take a decisive lead as the only oil producer in the EU and take forward the draft proposal tentatively put forward by the Luxembourg Prime Minister on taking action on the windfall profits of oil companies? Is it not time for the Government to take a lead in the EU as well as nationally to ease the pain of hard-pressed motorists and of families dealing with ever-rising heating oil costs?

Lord McKenzie of Luton: My Lords, that item was not on the agenda of the May ECOFIN, which is what the Question relates to. High oil prices are significant for the general economic well-being of the EU as well as for the individual situation of consumers. The UK has done what it has done and has been challenged by some for doing so. I shall pass on to Ministers with responsibility the plea for some leadership more widely in Europe on that matter.

Lord Barnett: My Lords, is it still Treasury policy not even to discuss any question of European Union taxation affecting this country, even if it is beneficial to free trade throughout the European Union? For example, is the Minister aware that it has been said by serious people that criminal activity in missing trader-type inter-community fraud is costing the European Union, including ourselves, a lot of money? I know that the Treasury is trying to deal with that through the Finance Bill, but does the Minister accept that it would be better to use the European Union across the board to help to deal with that serious problem?

Lord McKenzie of Luton: My Lords, as I outlined in my original reply, VAT was discussed at ECOFIN, and a VAT package was put forward by the Austrian presidency. That package was focused on modernisation and simplification of some of the VAT rules, which is long overdue. It also contained changes to allow effective operation of the internal market while ensuring that member states had the greatest control over their own tax systems and revenue. In particular, it looked at services and where those supplies were deemed to have been made.
	My noble friend makes a crucial point about missing trader fraud—carousel fraud, as it is known. The UK has looked at means of stopping it, in particular by dealing with reverse supply mechanisms for the sort of products that are subject to this fraud, which is very serious and costs the Exchequer a lot of money.

Lord Howell of Guildford: My Lords, is the Minister aware that we think the idea of a windfall tax on oil companies is a rotten idea and a silly one at a time when we are trying to get more investment into the oil industry to stabilise oil prices and energy security? Does he agree that, if the Chancellor wants to reduce the price of petrol, an opportunity is open to him? It might not be very wise, but he could do that simply by reducing the 70 per cent tax on every litre of petrol. Is not an even better course than any of those to urge moves towards a less oil-dependent and a greener pattern of economy? There are measures that we would very much like to see the Government getting on with to do that rather than merely worrying about the present price of oil.

Lord McKenzie of Luton: My Lords, there were a number of points raised in that question, none of which was the subject of discussion at the ECOFIN meeting, but I will try to respond in general terms. The impact of windfall profits on oil companies can be dealt with in a variety of ways, and often investment decisions by oil companies are as much affected by the price of oil as by the tax structure itself. I remind the noble Lord that the situation that we face with high oil prices is generated by significant demand around the world, particularly from China and India. That is a different situation from the one that we faced in the 1970s when it was supply-side impacts. We have to recognise those world influences on the price of oil.

Lord Pearson of Rannoch: My Lords, the noble Lord referred to the action plan on the internal control framework. Can he enlighten the House as to exactly what that is and what progress is being made? Does it perchance have anything to do with the almost immeasurable fraud and waste in the European Union which now, according to its former chief accounting officer, Marta Andreasen, is entirely out of control, to the extent that it cannot even be measured, let alone disclosed?

Lord McKenzie of Luton: My Lords, it will come as no surprise that I do not accept the general thrust of the noble Lord's point. We recognise that there have been issues about statements of assurance, which have not been forthcoming for too many years, although there have been recent improvements. Certainly, 2004 showed an improvement over 2003 in that regard, particularly following the introduction of the integrated administrative and control systems on agricultural expenditure. A full accruals accounting system was introduced in January 2005. The latest proposals relating to integrated internal controls will be another significant step that the UK strongly supports to help tackle the issues.

Lord Brooke of Sutton Mandeville: My Lords, in the context of amity, productivity and in particular relevance, how long did the meeting last?

Lord McKenzie of Luton: My Lords, I honestly cannot tell you. If it is a matter of such fascination for the noble Lord, I will find out and write to him.

Food: Organic

Lord MacLaurin of Knebworth: asked Her Majesty's Government:
	What steps they are taking to encourage United Kingdom self-sufficiency in organic food.

Baroness Farrington of Ribbleton: My Lords, the Government would like to see UK producers meeting more of the demand for organic food. The action plan to develop organic food and farming in England aims for the UK-produced share of the indigenous food market to have increased to 70 per cent by 2010, which would be similar to that for conventionally produced foods in a similar category. Good progress is being made towards that end.

Lord MacLaurin of Knebworth: My Lords, I thank the Minister for that reply. What in her view is preventing British farmers from fulfilling most of the growth in consumer demand for organic food in this country? Is it, for example, the high cost of conversion? Is it uncertainty about the future of the market? Or is it the lack of a level playing field, with non-UK producers being required to meet lower standards than their UK counterparts?

Baroness Farrington of Ribbleton: My Lords, there were quite a lot of questions there, but I will seek to answer them all. We work closely with the retailers. Obviously, we work particularly closely with the farmers because of the importance of helping them to cope with a situation in which inevitably there will be fluctuations in supply and demand. Organic food that comes from the rest of the European Union must meet the same standards as ours because the level is applied throughout the European Union. There are financial arrangements to help people to convert and additional help for organic farmers who are going on to the new scheme.

Lord Sewel: My Lords, does the Minister accept that the export of organic agricultural products is a significant part of the development strategies of many of the countries that the G8 are so concerned about?

Baroness Farrington of Ribbleton: My Lords, yes. That is why we want to work in close co-operation with our own producers to ensure that they are not treated unfairly. We also want to ensure that we do not in any way impose—it would be illegal and unethical—unreasonable tariff and import barriers. I answered the original Question in the context of indigenous food. At the moment it is not possible to grow, for example, pineapples or mangos in the UK, so we are talking sometimes about totally different food areas.

Lord Taverne: My Lords, if the Government are concerned to base their policy on scientific evidence, will they not recognise that organic farming is essentially based on a myth—the basic scientific howler that synthetic chemicals are bad and natural chemicals are good? Every time that the claims made for organic food have been examined by an independent body, such as the Advertising Standards Authority or the Food Standards Agency, they have been rejected. In those circumstances, would it not be wise for the Government and more ethical for supermarkets not to promote a product that commands premium prices and whose extra value is illusory?

Baroness Farrington of Ribbleton: My Lords, I am interested to know what position the noble Lord, Lord Taverne, takes on the subject.
	I am aware that the work that has been done to make comparisons between nutritional standards has certainly not proved the organic case. I am also aware that a great many people prefer to have food that has not been subject to chemical treatment as part of its growth. To a certain extent, it is a matter for the individual consumer, and the demand for organic produce is increasing.

The Countess of Mar: My Lords, although I entirely agree with the Minister that it is a matter of customer choice whether to buy organic food, is it not also the case that a certain amount of research, particularly that done in America, has shown that there are pesticide residues in the blood of little children? In view of the fact that a child's immune and central nervous systems are not complete when they are born, is it not wise that some parents choose organic food?

Baroness Farrington of Ribbleton: My Lords, I get the awful feeling that I am caught between a rock and a hard place here. I have not been briefed on the research to which the noble Countess refers, so I do not have a government evaluation of it. However, I have read information about the research. It would be a very unwise person who, without the benefit of hard scientific data, argued in this field with the noble Countess.

Lord Carter: My Lords, is my noble friend aware that the proposition advanced by the noble Lord, Lord Taverne, was put much more succinctly in the old farming saying that organic food is produced by the combination of muck, mystery and magic? What proportion of UK food consumption is provided by UK organic food production?

Baroness Farrington of Ribbleton: My Lords, my recollection is that it is about 1 per cent, but I shall write to my noble friend if I am wrong. Feelings run high on the subject, and the noble Countess is not alone in being worried about whether pesticide residues get into people through the food chain. That is a concern. My noble friend knows more about farming production than I do, but there is certainly growing consumer demand for food that has been produced with minimal or zero levels of chemical addition during its growth.

Earl Peel: My Lords, most of us applaud the sentiments expressed by my noble friend Lord MacLaurin, but does the noble Baroness agree that such objectives should apply to all food, not just to organic food? To that effect, what are the Government doing to reduce the impact on our producers of cheap imported food that does not comply with the same statutory environmental and animal health standards as are imposed on our producers?

Baroness Farrington of Ribbleton: My Lords, we work closely with other governments in the European Union to ensure that European Union standards apply. In the context of my earlier reply on developing countries and their produce, we will seek to ensure that our retailers are not disadvantaged because of differential standards.
	I understand that bringing indigenous organic food production up to 70 per cent will match the figure for non-organic indigenous food production. We at all times seek to work—for example, through government procurement—to ensure that the time taken to get food from the supplier to the plate is as short as possible. We work very closely with suppliers through a variety of means, including supporting farmers' markets, to ensure that where possible—for example, in school meals—food is procured locally.

Noble Lords: My Lords—

Lord Rooker: My Lords, we are into the 24th minute. We must move on.

Legislation: Social Impact

Lord Phillips of Sudbury: asked Her Majesty's Government:
	Whether they will undertake a review of the impact on society of the growing volume and complexity of legislation.

Lord Bassam of Brighton: My Lords, the Government announced a radical programme of regulatory reform in the March 2005 Budget. They have listened to business and to public sector and voluntary organisations and are currently undertaking a radical reform agenda to strip away unnecessary and burdensome regulation at home and in Europe.

Lord Phillips of Sudbury: My Lords, I am grateful for the Minister's short reply. I wonder when he last went into our wonderful Library and gazed at the current edition of Halsbury's Statutes, which shows that we have nearly 400,000 pages of primary legislation and nearly 400,000 pages of secondary legislation. Does he agree that that corpus of law has increased at the rate of 13,000 pages a year and is indigestible, bureacratising and deeply demoralising for the whole of society? Will the Government contemplate suspending all legislative activity save emergency legislation and concentrating all their efforts on implementing the law that we already have and assessing its impact?

Lord Bassam of Brighton: My Lords, I was almost inclined to agree with the noble Lord at one point. Then I reminded myself that he and I spent many happy hours contemplating something called the Charities Bill. He knows that legislation better than I did, but I would wager that he was not a million miles away from contributing to the Bill's growth over the year of its consideration. If he wishes to issue a disclaimer, however, I shall happily hear it.

Lord Soley: My Lords, bearing in mind that no future government are likely to reduce legislation significantly, would it not be more productive to consider ways in which we could improve the quality of legislation for all governments at all times? One of the ways in which we could do that is to introduce post-legislative scrutiny. If we did that without some of the party-political aspects that occasionally take over our proceedings in the Chamber, we could enhance the reputation and activities of the House.

Lord Bassam of Brighton: My Lords, my noble friend Lord Soley is absolutely right. He makes an important point about post-legislative scrutiny. I also endorse and approve of pre-legislative scrutiny but, as I think I have just pointed out, that has a habit of generating longer rather than shorter legislation.

Lord Strathclyde: My Lords, through the Minister, I congratulate the noble and learned Lord the Lord Chancellor and the noble Baroness the Leader of the House on keeping their head when so many about them were losing theirs in the most recent Cabinet reshuffle. Did the Minister notice in the weekend's press that it was said that responsibility for future legislation on this House was being transferred to Mr Jack Straw, the Leader of another place? Is that not the first time in the history of this Labour Government that a House of Lords Minister does not have responsibility for that legislation? Can he confirm that?

Lord Bassam of Brighton: My Lords, I am intrigued by the noble Lord's analysis. I always am, but I am not sure whether that has a great deal to do with the quality of the legislation that your Lordships' House more properly considers.

Lord Tebbit: My Lords, surely the Minister recognises that if Mr Hain is involved—

Noble Lords: Mr Straw.

Lord Tebbit: Sorry, my Lords, if Mr Straw is involved—although it would not matter if it was Mr Hain—the quality will inevitably go down, which it would not do if it was dependent on Ministers in this House. Surely the Minister knows that.

Lord Bassam of Brighton: My Lords, as the noble Lord knows well, there is a fantastic array of talent in your Lordships' House. Indeed, the noble Lord is very talented himself and has been known to add to the weight and length of legislation. There is an enormous amount of talent at the other end.

Lord Dearing: My Lords, I have no intention of commenting on the current Bill before Parliament, but some years ago I was appointed top man in a large organisation where much needed to be done. A stream of initiatives flowed from me. It took me about a year to realise that that was totally counter-productive; large organisations can cope with only a few things at once. Is there anyone in the machinery of government—say, in the future legislation committee—who can act as the devil's advocate and say, "No, we have done too much already. Leave it alone"?

Lord Bassam of Brighton: My Lords, to give this Government and previous governments credit, there is always a desire to legislate less and more accurately. Our Government are a fine example of that.

Lord Goodhart: My Lords, is the Minister aware of one of the main reasons why the costs of services, particularly for criminal legal aid, are going up enormously? The Government give us a new criminal justice Act every year, which simply piles more offences on the existing number and creates more legislation to be considered by the courts.

Lord Bassam of Brighton: My Lords, I am sure that that is true. The noble Lord is an active and busy lawyer, who I believe is not one who would want to add to that burden.

Lord Howarth of Newport: My Lords, has my noble friend noticed that under all governments, Ministers and officials appointed to new jobs—officials seem to be reshuffled almost as often as Ministers, unbelievably—want to make their mark? They commonly seek to do so by legislating and regulating. What is the average shelf life of Ministers and officials in particular posts? Does the Minister agree that, if it were longer, our society might have less legislation to absorb, albeit that so much legislation in recent years proposed by this Government and refined by your Lordships' House has been excellent?

Lord Bassam of Brighton: My Lords, I am sure that the noble Lord's analysis is spot-on. I do not have the facts and figures to prove it. I shall have to think about that. Perhaps more detailed research on the matter is required.

Business

Lord Grocott: My Lords, perhaps I may say a few words about business later today. First, as has already been shown on the annunciator, with the leave of the House, my noble friend Lord Drayson will repeat a Statement on Iraq, on the Basra incident. We will take it immediately following consideration of the Work and Families Bill. Secondly, as the House will know, the Northern Ireland Bill will, we hope, go through its remaining stages. The intention is that any information that the House will need between the Committee, Report and Third Reading stages will be placed on the annunciator during the time that we consider the Electoral Administration Bill.

Lighter Evenings (Experiment) Bill [HL]

Report received.

Work and Families Bill

Lord Grocott: My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Work and Families Bill, has consented to place her Interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Bill read a third time.
	Clause 3 [Additional paternity leave: birth]:

Baroness Miller of Hendon: moved Amendment No. 1:
	Page 2, line 46, at end insert—
	"( ) Regulations under this section shall provide for—
	(a) the mother to provide written confirmation that the person claiming additional paternity leave has satisfied the conditions in subsection (1)(b) and (c) and is the only person claiming it;
	(b) the mothers' employer to provide written confirmation that the mother was entitled to maternity leave, with or without pay, and has taken such leave and has notified her intention to return to work,
	and the employer concerned shall be entitled to rely on those confirmations without being required to make further enquiries as to the matters in subsection (1)(b) and (c)."

Baroness Miller of Hendon: My Lords, it is with some disappointment—indeed, with quite a lot of regret—that I have to take up your Lordships' time by bringing back this amendment for the third time. I am compelled to do so simply because I have been unable to extract from the Government any firm commitment about the practicalities of the operation of this new concept of additional paternity leave, for the protection both of the employers of the putative father, who will be required to provide the facilities for such leave, and, no less important, of the Inland Revenue, which will be able to finance it. What I find curious about the Government's attitude is that each time I have raised this matter in previous stages, they have unequivocally accepted the principle of what I seek to do. My objective is to substantially reduce the possibility of fraudulent claims, although of course they can never be entirely eliminated; to provide the employer of the person claiming additional paternity leave with the right to assume that he is entitled to it without having to conduct difficult and intrusive investigations; and to ensure that an employer who meets such a claim in good faith is not later penalised by the Inland Revenue if a double claim is made on more than one employer.
	In the consultation Work and Families: Choice and Flexibility, which took place in February 2005, some 15 months ago, the Government offered three choices: first, self-certification by the mother and father; secondly, self-certification by the parents combined with confirmation by the mother's employer; and, thirdly, compliance checks made by the Inland Revenue. In repeating those three options to the Grand Committee, the Minister told noble Lords that,
	"From that consultation, it became clear that self-certification from the mother and father . . . with confirmation from the mother's employer that the mother was entitled to maternity leave and/or pay and has notified her intention to return to work was the preferred option".—[Official Report, 9/3/06; cols. GC342-43.]
	Noble Lords can compare the unequivocal wording of the Minister's statement with that used in my amendment. I simply cannot understand why that should not be the end of the matter.
	However, by the time the Bill was reported to your Lordships' House, the Minister had given no indication that that is how the proposed regulations would be framed. I therefore brought the amendment back on Report. The Minister again provided warm words of assurance, or reassurance, by saying in almost identical terms:
	"From that consultation it became clear that self-certification by the mother and father of their eligibility, with confirmation from the mother's employer . . . was the preferred option".
	He went on to say that the option,
	"keeps bureaucracy to a minimum while limiting the potential for errors in payment or abuse of the system".—[Official Report, 25/4/06; col. 109.]
	So I assumed, once again, that the matter was settled. But after Report I was again told by the department in a conversation held on 4 May—I thank the Minister for arranging it—that it was still consulting on this matter with such bodies as the TUC, the Mothers' Union, the Federation of Small Businesses, the Engineering Employers' Federation, the Equal Opportunities Commission and the Institute of Directors. Incidentally, I was amazed to be told that certification by the Inland Revenue was one of the options still under consideration. How does that conform to the Minister's stated objective, which I have just quoted, of keeping bureaucracy to a minimum?
	I am sure that the Government are not seriously suggesting that the Commissioners for Revenue & Customs should send out hordes of inspectors to check whether claimants for additional paternity leave are doing their fair share of nappy changing and looking after the baby's siblings; I am certain that that is not what is in mind. They would simply ask the claimant to fill in a claim form saying that the person concerned is entitled to the benefit. If that is not self-certification, then simple, plain English has lost its meaning. I am at a loss to understand why the Government are still pursuing a policy of consulting on the outcome of a consultation which reached a definite conclusion and talked about the preferred option, as the Minister has twice reported during the progress of the Bill through this House. It is therefore totally puzzling why the Government refuse to climb down from the fence on which they appear to be impaled.
	It is not for me to impute motives; I would not do so anyway, as the saying goes. But if I were to do so, I would say that the reason might be found in the corridors of the usual suspect: the Treasury. It will have to bear the cost of this well-meaning legislation. Consultations about the implementation of the conclusion of extensive consultations and reconsulting consultees sounds very much like kicking the project into touch.
	I say at once that I clearly have no desire to impose any kind of timetable on the Government for the implementation of additional paternity leave and its imposition on employers—that, of course, is a matter for the Government—but, to coin a phrase, the smack of firm government is required to end the uncertainty. The Government need to announce a clear, unambiguous decision on how the benefit will be eventually implemented.
	The House may recall that in Committee I called a vote on redundancy pay. In doing so, I said that it was quite shocking that so many Bills are now becoming enabling legislation with huge, long timetables, where consultations take place, more consultations take place and then, when we think we have got there, another consultation takes place. The Bill started 15 months ago; it has finished its passage through the Commons and we are at Third Reading. When the Bill is passed there will be no further chance to deal with these matters. I understand from the meeting with the Minister on 4 May that draft regulations will be published around summer 2007 and, from memory, that the Bill could be implemented by the end of 2007, or perhaps October 2007. That will be four years, which really is too bad. The reason I divided the House previously was to say to the Government that we should not legislate in this way; that when we pass Bills, we should know what we are passing. My amendment would introduce what the Government themselves describe as the preferred option. I beg to move.

Baroness Walmsley: My Lords, this amendment is a small measure to try to reduce the possibility of fraud. During our discussions of the measure at earlier stages, the Government did not appear worried about the possibility of fraud. If they are not too worried, we will have to accept what they say, but I hope the Minister will be able to reassure us in his response that the Government will keep a very close eye on these measures to see whether any evidence can be gathered on whether they are working properly or whether any fraud is going on. If fraud is going on, I hope that the Government will undertake to come back to the House, perhaps to apologise to the noble Baroness, Lady Miller of Hendon, and to reassure us that measures will be taken to make sure that two different fathers do not claim the benefits to which only one father is entitled.

Lord McKenzie of Luton: My Lords, I thank the noble Baroness, Lady Miller, for raising this matter again. I anticipated that she would do so and it is important that we should discuss it further. I also thank the noble Baroness, Lady Walmsley, for her contribution.
	Let me reiterate to the noble Baroness, Lady Miller, that we genuinely share the objective of ensuring that the system is practical, as light-touch as is sensible and avoids the prospect of fraudulent claims. We have a shared interest in achieving that outcome. I reaffirm to the noble Baroness, Lady Walmsley, that we are concerned about ensuring that the system is robust and that there is no prospect of fraud. Certainly, whatever system is introduced, if it proves ineffective, it will be incumbent on the Government to review it and to change it. It is in all our interests to get this right.
	I should also make clear that we, as a Government, do not contemplate kicking this matter into touch. The whole ambit of the Bill is important to us—its impact on families and children—and we want to see it enacted and taken forward, but we need to do so on a proper basis.
	I fully acknowledge and agree wholeheartedly with the noble Baroness that how this system will operate is of concern to employers. I hope that by setting out the context of the policy and how we propose to take it forward, the noble Baroness's frustration will be somewhat reduced.
	This policy is an important part of the package of the Bill; it has been recognised as a novel provision and an important part to get right. It will provide fathers with a greater opportunity to be involved in raising their child and offer parents more choice in caring responsibilities. This has been embraced by all parties. We realise that we have taken this Bill through without any draft regulations on the additional paternity leave and pay scheme, and that the consultation on the detail of the scheme has not been concluded before this stage of the Bill. While I acknowledge that in normal circumstances this would be by no means ideal, I think we are sensible to have adopted this approach. The scheme forms a part of the overall package and the aim is to introduce it alongside the extension of statutory maternity pay, maternity allowance and statutory adoption pay to 52 weeks. The Government aim to do this by the end of this Parliament.
	Business is clear about what is in the pipeline; there is time to explore the detailed aspects of the scheme and to make sure we get this right for employees and employers. If we want fathers to take this opportunity, it must work for all. Prescribing in primary legislation how the administration should work would cut across the consultation, which is still running, and the development of the policy. I doubt whether this would be welcomed by business.
	We asked for views on the administration of the transferred maternity leave and pay scheme through the Work and Families: Choice and Flexibility consultation document, published in February 2005. The idea of self-certification, with the mother's employer confirming that the information in respect of the mother is correct, as referred to by the amendment, came through as the preferred option. However, it was by no means a unanimous preference, which is why we are seeking further views through the current consultation published on 8 March. It is important to get right the administration of the additional paternity leave and pay scheme, and we need to ensure that a balance is struck between the responsibilities of employees and their employers.
	During the consultation period we have taken the opportunity to engage with a variety of stakeholders to discuss the scheme and, in particular, its administration. So far, we have had informal discussions with a range of business representatives including the CBI, the Forum for Private Business, members of the Small Business Council, as well as other interest groups such as Fathers Direct, Working Families and the TUC. We also have meetings arranged with the Mothers' Union, the Federation of Small Businesses, the BCC, the EEF, the EOC and the IoD before the consultation closes.
	We have also discussed the administration of the scheme with a working group set up by HMRC, which is made up of payroll experts from a variety of organisations including representatives of both large and small firms. These discussions have indicated that there is still a range of views and ideas to be explored on how the administration might work. The payroll group, for example, leant towards having a government department involved in the process, providing confirmation of start and stop dates to the relevant employers. I am not sure whether that would involve them turning up to see who was changing the nappies, but the noble Baroness created a nice vision. This may well have benefits, but we will need to explore it further and assess whether it could be a viable option. This indicates that there are still options to consider and I hope noble Lords agree that time should be taken to look at all the options rather than making any hasty commitments to how the scheme works in the Bill, particularly with regard to enshrining it in primary legislation.
	The amendment has many merits and would keep matters relatively straightforward. However, as there are alternative approaches and time is available to explore them further, we do not think this amendment should be accepted. Under existing maternity and paternity leave arrangements, the administration of the schemes is contained in secondary legislation, and we believe that we should mirror this approach in relation to additional paternity leave. If employers came up with suggestions of ways in which we could simplify aspects of the administration, we would be able to amend the regulations in the future.
	I reiterate that I fully understand the frustrations of not having draft regulations before the House on this aspect and I fully appreciate the intent behind the amendment. I can assure the noble Baronesses, Lady Miller and Lady Walmsley, that we are as anxious as they are to make the scheme as easy as possible for employers to administer. I take this opportunity to offer the noble Baronesses an assurance that we will keep them closely informed as we take this forward, providing updates on the progress of this work and, in particular, on the administration of the scheme. It is important to put that on the record. With that in mind, I ask the noble Baroness to withdraw the amendment.

Baroness Miller of Hendon: My Lords, I thank the Minister for the assurances which he has given and which are now on the record. The Minister knows that we agree with this Bill and do not want to put difficulties in the way of it. However, it is extraordinary that a certain length of time for consultation is required, after which a preferred option is expressed before yet more consultation. It makes the job of looking at the Bill extremely hard when you do not have a clue. As the Minister said, we have not seen draft regulations; we do not know what they will say. That is a pity, because we are passing the Bill rather in the dark. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Walmsley: moved Amendment No. 2:
	After Clause 12, insert the following new clause—
	"ORDINARY PATERNITY LEAVE
	(1) Section 80A of ERA 1996 (entitlement to paternity leave: birth) is amended as follows.
	(2) In subsection (3) after "leave" insert "to be taken together, as two separate weeks or as separate days by agreement with the employer".
	(3) In subsection (4) for "a period of at least 56 days" substitute "a period of at least 182 days and of no more than 365 days".
	(4) After subsection (5) insert—
	"(6) Provision under subsection (5)(c) shall secure that the notice period for taking leave under this section shall be no more than eight weeks.""

Baroness Walmsley: My Lords, the amendment is a composite of various amendments that have been tabled at different stages of the Bill. They all relate to the regulations which surround ordinary paternity leave; that is, the up to two weeks' paternity leave which a father is able to take during the first eight weeks of the baby's life.
	The amendment introduces three areas of flexibility to the arrangements for that leave. Subsection (2) of the proposed new clause introduces flexibility to how the leave can be taken. With the employer's agreement, the father could take those two weeks of leave either as two separate weeks, as two weeks together or as individual days. However, I stress that that would be with the employer's agreement. The two parties must agree on a way in which the father's leave can be taken that is convenient for the employer.
	Subsection (3) would give increased flexibility to the period during which the leave can be taken. It would increase it from the first eight weeks of the baby's life up to at least the first six months of the baby's life, or possibly up to the first year. Subsection (4) proposes that a reasonable and proportionate amount of notice be given by the father before taking the leave which he has negotiated with his employer.
	As your Lordships will see, the three areas of the amendment are linked. Their purpose is to increase the number of fathers who take the maximum amount of leave to which they are entitled. As a result, fathers would be able give support to mothers and have the opportunity really to bond with their child. The whole family would be able to bond as a unit.
	We all know that fathers who are well bonded with their child are highly unlikely to abandon them later in their lives, even if they are separated or divorced from the child's mother. I think that we all agree that every child needs a father, even when the father does not live with the child. The Government should do anything they can to improve the father's opportunities to bond with the child in those early days.
	On Report, the Minister said:
	"To argue that the two weeks' ordinary paternity leave should be taken at a time of the father's choosing, up to a year following the birth, is to ignore the purpose of ordinary paternity leave".—[Official Report, 25/4/06; col. 128.]
	I really do not agree. It should be for families to decide how best to organise their family life, in relation not just to ordinary paternity leave, but to the rest of their working lives. I refer to our previous debates on the right to ask for flexible working. Far too many parents see very little of their children, which is not good for the family, the parents or the children. We see the result in bad behaviour in schools and even in youth crime.
	The Minister also said:
	"Extending the time over which paternity can be taken would reduce certainty for employers at a time when we are bringing in other measures to increase certainty for employers, such as extending the period of notice women must give if changing their return from maternity leave". [Official Report, 25/4/06; col. 129.]
	In contradiction to that, at the same time, the Government are introducing additional paternity leave. I absolutely welcome that but I cannot say that it contributes to employers' certainty. I would point out that that additional paternity leave has a notice period of eight weeks. If eight weeks is enough notice for an employer when the father is intending to take up to six months' leave then surely it is quite enough for employers to make the necessary managerial decisions and arrangements for a father who is going to take only two weeks. By the way, in subsection (2) of my amendment, he would be taking it at times, on days and in batches of time "by agreement with the employer". It all sounds very reasonable to me.
	In the same column, the Minister said that,
	"the leave must be planned for and managed by their respective employers".
	Later, he said that,
	"the notice period for paternity leave is a measure which protects employers, ensuring they have time to plan".
	I have no wish to increase the burden on employers. I have every wish to allow them adequate time to plan for this ordinary paternity leave. I want to encourage fathers to take that leave but the Government clearly believe that eight weeks' notice is enough, so why will they not give eight weeks' notice for ordinary paternity leave as well?
	I have very much welcomed many of the measures in this Bill but I have been disappointed about the Government's intransigence over certain issues as we have gone through our debates. The Government are clearly not listening to organisations such as Working Families, the Equal Opportunities Commission, the National Association of Citizens Advice Bureaux and carers' organisations that are very concerned about the narrow definition of carers, which will particularly affect carers who do not reside with the person they are caring for. This might particularly affect gay people and asylum seekers who are least likely to be closely related to the person for whom they are caring. But that is by the way.
	If the Government are serious about their wish to support families and give them the choice of how they run their family and working lives, then at this very last throw, I am giving the Government one more opportunity to give me some valid reasons why they will not accept these small increases in flexibility for ordinary paternity leave so that more fathers can actually take it. I beg to move.

Baroness Morris of Bolton: My Lords, the amendment moved by the noble Baroness, Lady Walmsley, seeks to make it easier for fathers to take the leave to which they already have an entitlement. I agree wholeheartedly with her comments about the importance of fathers, particularly in those early stages of a baby's life.
	On Report, I said:
	"One of our concerns about the right to existing paternity leave is its rigidity".
	On that occasion, I also said:
	"Legislation should not be so prescriptive that it does not provide flexibility when it is desired and agreed between employers and employees". [Official Report, 25/4/06; col. 126-7.]
	I very much support what the noble Baroness, Lady Walmsley, is trying to achieve. However, I do understand that, given the range of additional entitlements that this Bill already confers on employees, there will be an extra burden on employers. At this late stage, perhaps that is just too much to ask. However, when the Government are consulting and taking all the time commented on by my noble friend Lady Miller, perhaps they will consult on the flexibility of ordinary paternity leave so that where the leave is agreed between employer and employee, there can then be more flexibility in the time taken.

Lord McKenzie of Luton: My Lords, I thank the noble Baroness, Lady Walmsley, for introducing these amendments and acknowledge that they ameliorate those she produced earlier and are based on agreement with the employer. We have listened to all sides in our consultations and discussions, but, obviously, there is not always agreement particularly on the practicalities. Of course we want as many fathers as possible to take up the opportunity available for ordinary paternity leave, but, as the noble Baroness, Lady Morris, indicated, there is a balance to be struck.
	Before turning to the detail of the amendment, it may be helpful to reflect briefly on the way in which paternity leave and pay is working. It is the Government's view that the historic new entitlements introduced three years ago for working fathers have been widely welcomed, are working well and are not presenting significant administrative difficulties to either employers or to new fathers. Three years on, research evidence is helping us to build a clearer picture. The maternity and paternity right and benefits survey of 2005, published earlier this year, contained some encouraging facts. Fathers are now taking more leave around the birth of their child, with the vast majority—93 per cent—taking time off around the time of the birth, and four-fifths of those taking up their entitlement to paternity leave. The survey asked those fathers who did not take advantage of paternity leave and pay why they had not done so. Of the answers given in the survey, none gave as a reason a problem with flexibility or with the notice they had been required to give. In short, the facts do not bear out the argument that large numbers of fathers are being denied their entitlement because of inflexible regulations and administrative arrangements.
	Against this must be weighed the disruption to employers of having to absorb more changes to the rules. These amendments seek to make significant changes to the way the existing right to paternity leave is structured. First, they seek to allow paternity leave to be taken not in whole weeks but in as little as individual days. The current regulations require that paternity leave is taken in weekly blocks—either one week or two consecutive weeks—and we consulted on that structure before it was introduced. It was felt that, on balance, providing employers with clarity and certainty over how the leave would be taken was the approach that best balanced the interests and needs of both employees and the businesses that employed them. At the time, there was some concern among employers that allowing the leave to be taken in smaller, separate units could prove administratively complicated. I appreciate that the noble Baroness's amendment would allow such flexibility only by agreement between employer and employee.
	I accept that some employers might see some attractions in being able to arrange fathers' leave this way. However, we would need to consider carefully whether, even with this caveat, pressure to allow greater flexibility might grow on many employers who did not see a business case for changing the existing system. The Government are always happy to listen and we have certainly not ruled out looking again at flexibility. But the principles of better regulation demand that we would be very sure that a good case exists for introducing further changes to employment law and that the implications have been properly thought through. I am not convinced that such a case has been made.
	I must add that accepting this change would also require a consequential amendment to the primary paternity pay legislation. Statutory paternity pay is a weekly payment made in respect of a period of one or two weeks. To make the change proposed would mean that anyone taking their leave in anything other than weekly blocks would be left without an entitlement to pay for that leave. That is a significant technical issue.
	I turn now to the time during which the paternity leave may be taken. I will repeat the arguments that I advanced at Report. Arguing that the two weeks' ordinary paternity leave should be taken at a time of the father's choosing, up to a year following the birth, is, I am afraid, to confuse the distinct purposes of ordinary and the proposed additional paternity leave. The entitlement to the current two weeks exists to allow the father time off work to support the mother and care for the child soon after the birth; a time which is highly demanding of both parents and during which the support that the father can provide, both to the mother and to the new child, is very often hugely valuable. We are introducing additional paternity leave for those fathers who wish to take leave later on in the first year of the child's life. The purpose of that additional leave is not the same.
	As I said at Report, our view is that a period of 56 days allows a sensible degree of flexibility for the employee to choose when best to take the leave, while at the same time ensuring that the leave is taken soon after the birth. The amendment would allow those two weeks to be taken anywhere from birth to between six months and a year after the date of birth of the child. We contend that that would place far too great a burden on the employer.
	The third part of the amendment seeks to reduce the notice which an employee must give of their intention to take paternity leave. I do not intend to rehearse again the various good arguments against such an amendment, other than to say that, although I recognise that in this amendment the noble Baroness has looked to the proposed notice period for additional paternity leave, the point at which a father must give notice of his entitlement to paternity leave and the expected date of child birth reflects the point at which a mother must give notice of her maternity leave. At this point the mother will be 24 weeks into her pregnancy. There is therefore a point of consistency here, although that is not the only reason for resisting the amendment. The point I made in my opening remarks—that we are not aware that the existing system is preventing fathers taking their leave—holds here.
	Employers are, of course, free to accept a shorter period of notice if they wish and indeed must accept shorter notice if it is not reasonably practicable for the employee to give the notice set out in the regulations. On top of that the employee need give only four weeks' notice of his intention to change his plans. This does not mean, though, as was suggested at Report, that the employer does not benefit from being told before that point that the father intends to take leave. The current regulations give both parties the right balance of flexibility and certainty.
	The work and families package is a balanced one. I believe that the noble Baroness, Lady Morris, recognised that point. Its success lies in that balance: there are measures in the Bill for both employers and employees. For that reason the package has commanded the support of a wide variety of stakeholders, including business. I do not believe that the amendments proposed by the noble Baroness respond to a real problem with the way the current rules work in practice—indeed, as I have said, paternity leave and pay have been a very great success—and for that reason I do not believe that it would be right to ask employers to plan for and adjust to further changes in the overall package of legislation. I hope that the noble Baroness will accept that and that the amendment will be withdrawn.

Baroness Walmsley: My Lords, I thank the Minister for his reply and the noble Baroness, Lady Morris of Bolton, for her comments.
	It seems to me that the Government are putting businesses before families. I do not believe that it would do families any good if businesses were put under undue pressure and were to go to the wall because of it. Families would then be left without jobs and incomes. That would not be a good idea. But given all the evidence of how beneficial flexible working and family-friendly policies are to the economic success of businesses, I do not believe that the measure would create an undue burden.
	The Minister and I slightly disagree about the number of fathers who are taking their ordinary paternity leave. He keeps saying that 93 per cent of fathers take time off around the time the baby is born. That is not the same as taking their full two weeks' paid paternity leave to which they are entitled. We know that a lot of them take paid holiday.
	To take the leave in individual days or two or three days here and there might be much more convenient for the employer. I noticed a chink of light in what the Minister said about that. He said that he would look again at that aspect of the flexibility for which I am looking to see whether opinion among businesses might change. That is an invitation to me to keep the pressure on. I noted what the Minister said about consequential amendments, but if the Government had been interested in the amendment, they would have proposed the consequential amendments. I would expect them to do so.
	The need for support for the mother does not diminish after 14 days, and in fact it can be even greater after 14 days, because over the 14 days she has very close attention from health visitors and the medical profession. It is only later that sometimes problems arise, either with breast feeding or coming off breast feeding and going on to other kinds of feeding.
	The Government are being completely unreasonable about the notice period. The mother can give only eight weeks' notice of a change of her return to work, and the father can give only four weeks' notice of a change of his intentions in regard to his ordinary paternity leave. Surely, then, double that amount would allow a business plenty of time to plan and manage that short amount of leave, especially if it was to be taken at times and in day blocks to suit the employer. The Minister and I will not have a meeting of minds on this, and I will not get anywhere because the Conservatives will not support me on it; quite clearly they too are putting business before families, which surprises me very much. I therefore beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 13 [Annual leave]:

Baroness Miller of Hendon: moved Amendment No. 3:
	Page 11, line 39, at end insert—
	"( ) If no regulations phasing the inclusion of Bank Holidays pursuant to subsection (7) have been approved by both Houses of Parliament by 31st December 2008, this section shall expire and be of no further effect."

Baroness Miller of Hendon: My Lords, before I speak to the amendment, I say to the noble Baroness, Lady Walmsley, that we do not put business before family. We are very much of the view that a balance must be struck, and we think that the Government have struck a balance.
	This is another amendment that I have been reluctantly compelled to bring back to your Lordships because of a strange reluctance on the part of the Government to commit themselves to the way in which one of the major provisions of the Bill is to be implemented. The Government have decided to award workers in England, Wales and Scotland an extra eight days' paid holiday a year. Those were called bank holidays; the idea was that they should be paid as well. Clearly, the manifesto commitment was simply tagged on to a Bill that was originally intended only to deal with maternity and paternity pay and leave to take advantage of a legislative slot. We are not arguing about that. But as an afterthought, the Government have obviously not yet managed to work out the means of implementing this new policy nor, I suspect, its full financial and commercial implication and costs.
	The Minister conceded:
	"Such a phased introduction would give a longer period for business . . . to adjust to the new arrangements; it would spread any additional cost over a longer period, and the amendment reflects the position of the CBI".—[Official Report, 25/4/06; col. 133.]
	In other words, the Minister thought that it was quite an interesting point of view, and I think he used the words "light touch". So what are the Government doing about bringing this provision for an extra week and a half's paid leave into force in several steps? It will not surprise your Lordships to learn that they are engaging in yet another round of consultation, and after what I have said before I will not make any more of that. I understand that the Government consult; they consult lengthily and they then consult on the consultation and so on, and eventually we get there. I understand all that—although I said that I would not repeat it I am afraid I did; I am guilty.
	If the Government were to bring in two days' leave a year, the whole exercise could be covered within the theoretical life of the present Parliament—two days in one year and two days in another and so on—because businesses feel that six extra days in one go is rather hard. The only question would be—by which two days in which year? That is not a very difficult problem.
	Another aspect of this concerns me. It is the suggestion that was made to me during my conversation with the department on 4 May that, rather than just relate the extra eight days specifically to the bank holidays, which is what I had originally thought and was what it said, the time could be given as a straightforward addition to the existing four weeks' statutory annual leave. I said that we could all understand where that might lead, because the four weeks would immediately become five and a half weeks, and then if the extra eight days were not taken as bank holidays, the employee could either want those days as well, or days off, or extra pay in lieu. When I mentioned that as a concern, I was told during the telephone conversation—and it was confirmed in the note afterwards—that indeed that was a matter of concern and it might happen. So, I understand that the Government felt that I might have a point.
	As consultation continues, I do not know whether the original idea of introducing the eight days' leave gradually instead of in a block to make it easier for businesses to accept or the new idea of not calling them bank holidays and just tagging on eight days will be implemented. The Minister obviously does not know yet because we are still in consultation. If the latter option is taken, given that the Minister was concerned when we spoke about employees also demanding bank holidays, will provision be made to prevent that happening? It would be interesting if he could confirm that to put our minds partially at rest.
	When the Minister responded to my amendment in Grand Committee, he stated that it was difficult, because,
	"it may place an excessive burden on business by changing the rules every year for four years or so".—[Official Report, 9/3/06; col. GC390.]
	I submit that an equal if not greater problem is being placed on businesses by this sword of Damocles hanging over them and the absolute uncertainty about whether the burden of the extra eight days will have to be absorbed all at once and, if not, by how many instalments a year, on which days and when: this year, next year or never?
	Also, in my conversation with the department on 4 May I was told that the Government felt it was necessary to consult the Low Pay Commission because many of those who will benefit will be on the national minimum wage. I did not comment to the Minister at the time because I wanted to think about it. I cannot see what that has to do with it, because the entitlement is intended to be universal and not means tested. The fattest of fat cats will be entitled along with the poorest of the poor, the neediest or whoever.
	Purely as a result of the desire to consult the Low Pay Commission, the Government told me that the earliest implementation date would be October 2007. That will be almost two years after the Bill was first introduced in the other place. Even then, there is no certainty about the timetable, because in the same conversation I was told—and I quote from the department's note because I did not take one and I wanted to report it accurately:
	"We are also aware of other potential impacts on the timetable; not least the potential for an issue that has not yet been identified to surface during the consultation process and also the impact of some cases currently before the House of Lords that we may need to reflect in the regulations".
	I understand that they may well have to consult on the last bit, but the idea that the Government now expect other identified issues to arise—every minute we find even more things—is a stark admission that this legislation is hasty, premature and not thought through. That is not necessarily a criticism of the Minister's department, but it applies to many other Bills. Given that all these unforeseen things keep cropping up, it is no wonder that the Government want to consult for ever.
	It is grossly unfair to commerce and industry that this uncertainty is being inflicted on them and that it will continue for at least another 18 months with no guarantee that it will be resolved even then. But the Bill will have been passed; that is the issue. It is essential that the Government concentrate on resolving this problem that they have created by introducing the concept of the extra eight days' paid holiday before, by their own admission, they had considered its implications.
	I am offering the Government a lifeline; I always go out of my way to do that for the Minister. In place of the deadline of 31 December 2007 that I offered for a sunset clause on Report, which would have been more than 18 months away, my amendment proposes a new deadline of 31 December 2008—two and a half years from now—for the sunset clause to operate. If the Government cannot get their act together by then, this clause has no place in the statute book, waiting to be imposed on business at some totally unspecified date, possibly with a mere 40 days' notice. The Government have to insert some certainty into this process and, as I said, I want to help them to do it. I have given them a lot of time. The Bill has gone through the other place and today is the last time that we can talk about it in this House. The time that I am proposing is more than generous. I beg to move.

Lord McKenzie of Luton: My Lords, I recognise that the noble Baroness is trying to be helpful to the Government on this matter, as she always is. I also reiterate that, whatever the formulation for these annual leave arrangements, there is no intention that it should consist of eight days of bank holiday for those who currently do not get them plus a further eight days. We need to ensure that the formulation avoids that and, if it is a concern of the noble Baroness, we acknowledge that and need to prevent that outcome.
	We anticipate that the outcome will be a phasing of the arrangements. However, there is obviously more than one way in which they might be phased in and it will not necessarily be done in the way that the noble Baroness proposed in earlier amendments. This will be part of the discussions that we hope will take place. In relation to the Low Pay Commission—

Baroness Miller of Hendon: My Lords, I thank the noble Lord for giving way and I hope that he will not mind my interrupting, but I did not want him to get to the end of his answer without explaining something to me. If there is more than one way of phasing in the arrangements, can he explain to us what the options are?

Lord McKenzie of Luton: My Lords, I do not wish to pre-empt the discussions that need to take place but it could be done in equal amounts of two days over a period, and there are all sorts of other ways that it could be done. I do not want to mislead noble Lords by suggesting that it will be done in one particular way; I just stress that we envisage phasing as part of the arrangement.
	If the majority of people who currently do not get the benefit of those extra eight days are low-paid, presumably the Low Pay Commission will take that into account in formulating its proposals. I do not think that the reference was intended to be any more sinister than that. Obviously, in evaluating the position of low-paid people, the Low Pay Commission will reflect on the whole range of benefits or disadvantages that they have in relation to other employees.
	The amendment would require any regulations made under Clause 13 to be approved by Parliament by the end of 2008. It is, if you like, a rather unusual sunset clause. Rather than seeking to stop something after a certain period, it would require regulations to be brought forward by the end of 2008, otherwise the powers under Clause 13 would lapse.
	I am afraid that I cannot support the amendment but not because of the timescale that it prescribes. Following the debate that we had on Report and the conversation that we have had subsequently, I am grateful that the noble Baroness, Lady Miller, has given us an additional year, compared with her earlier amendments. We certainly intend to make regulations within the timescale set out and are making best progress on that.
	I do not believe that the amendment is either effective or necessary. It would not be effective because of the way that it has been drafted. First, it refers to regulations regarding bank holidays. As I said during the debate on this clause on Report, we may well not refer to bank holidays or public holidays in exercising these powers. The issues involved in the statutory basis of bank and public holidays are complex. We believe that there may be more straightforward ways of achieving our objective than changing the statutory basis of bank and public holidays.
	Secondly, the amendment assumes that any additional leave as a result of this clause will be phased in but it makes no reference to the nature of any phasing. As I said both in Committee and on Report, we should not prejudge the outcome of the imminent consultation. Early discussions with business indicate that there are differing views on phasing. Some businesses that depend on tendering for contracts well in advance want a longer notice period of any change so that they can factor any additional costs into their tender prices, and that would be more helpful than a phased introduction. Let us not impose phasing on business without asking first, which we will do shortly.
	As I said, the amendment is not necessary. I am aware of the concerns of the noble Baroness, Lady Miller, on the process of this Bill, which contains a number of delegated powers. She has expressed concern over the ability of Parliament to properly debate such secondary legislation. While regulations made under Clause 13 will be subject to the affirmative procedure, the noble Baroness highlighted on Report the inability to amend draft regulations made under this procedure. I accept that, but the affirmative procedure provides a more stringent form of parliamentary control than the negative procedure because the regulations must receive the positive approval of both Houses. It is also worth pointing out that the proposal to extend annual leave to make paid leave for bank holidays additional to the annual leave entitlement enjoys cross-party support and support in principle from many business organisations.
	We intend to work closely with stakeholders to ensure that the support in principle for this proposal is maintained in practice. I am happy to assure the House that we will welcome views from the widest possible range of stakeholders throughout the consultation process and in drafting regulations, including from the CBI, small business representatives and the trade unions.
	I hope that I have persuaded the noble Baroness, Lady Miller, that the amendment is unnecessary and that, with the assurances that I have given, she can withdraw it.

Baroness Miller of Hendon: My Lords, I thank the Minister for his assurances, and I can assure him that I accept them. I know that he will be very pleased to know that.
	I am very disappointed, however, by his response, not because he said that the amendment is not necessary—I think it is necessary because we have to concentrate our minds—but because he said it was not effective on the grounds that the provision may refer simply to a number of days' "paid holiday" and that I had included the words "bank holiday". I am not a parliamentary draftsman. Had I thought about it in a little more detail, I could simply have provided in the amendment that there has to be a solution to the problem by December 2008, which would have been absolutely appropriate. The Bill started 15 months ago, and I am offering two and a half years, which means it will be four years before we see anything. I had intended to press for a Division but because the Minister said that the amendment is ineffective, I shall take pity on him and accept what he said. If, by the end of 2008, nothing has come forward, and I am not by then in my wheelchair, I will definitely do something about it.

Lord McKenzie of Luton: My Lords, let me be clear on the point. If the amendment were agreed to and the regulations to deal with annual leave were formulated in a different manner, notwithstanding that the regulations had been passed—they may have been passed earlier than the noble Baroness anticipated—they would cease to have effect because of her amendment. That would be the difficulty.

Baroness Miller of Hendon: My Lords, I understand that very well, which is why I do not intend to press my amendment to a Division. I want to ensure that we get something sensible on to the statute book. What I have taken from the Minister is the urgency of finishing the Bill within four years, and I am very sad about that. However, I take note of what he has said.
	I reiterate my hope that I shall not be in a wheelchair in two and a half years' time. If I am, and I am not doddering, I promise the Minister that we shall come back to this, although we might be in government by then and will change it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Schedule 1 [Leave and pay related to birth or adoption: further amendments]:

Lord McKenzie of Luton: moved Amendment No. 4:
	Page 19, line 32, leave out "employers" and insert "persons"

Lord McKenzie of Luton: My Lords, I cannot imagine that, even 20 or 30 years from now, the noble Baroness will not be here fighting hard.
	I apologise to the House for having to table a government amendment at this late stage in the process. It is intended to correct a minor drafting error in Schedule 1, which amends Section 80E of the Employment Rights Act 1996. At paragraph 38, line 32, the Bill reads:
	"The employers on whom duties may be imposed by regulations under section 80AA or 80BB include not only employees exercising rights by virtue of that section and their employers".
	The correct wording should be the "persons",
	"on whom duties may be imposed by regulations under section 80AA or 80BB include not only employees exercising rights by virtue of that section and their employers".
	It is clear that this is a minor drafting error, made during the construction of the Bill. Unfortunately, this error has only just been noticed. Therefore, we are tabling an amendment at this late stage. I apologise for that. I beg to move.

On Question, amendment agreed to.

Lord McKenzie of Luton: My Lords, I beg to move that the Bill do now pass.
	Moved, That the Bill do now pass.—(Lord McKenzie of Luton.)
	On Question, Bill passed, and returned to the Commons with an amendment.

Iraq: Basra Incident

Lord Drayson: My Lords, with the leave of the House, I shall repeat a Statement made in another place by my right honourable friend the Defence Secretary. The Statement is as follows:
	"With permission, Mr Speaker, I would like to make a Statement about the tragic crash of the Lynx helicopter in Iraq on Saturday and the immediate aftermath.
	"As the House will be aware, on Saturday, 6 May, at 13.50 hours local time, a Lynx Mark 7 helicopter, on a routine flight, came down in Basra city, crash-landing on the roof of an empty building. Five UK personnel on board the aircraft are missing, believed killed: Wing Commander John Coxen, Lieutenant Commander Darren Chapman, Flight Lieutenant Sarah-Jayne Mulvihill, Captain David Dobson, Army Air Corps, and Marine Paul Collins. Their next of kin have now been informed. I am sure that the whole House will join me in sending my deepest condolences to their families and friends. I would also like to express my sympathy to the families of all those who were killed in Iraq over the weekend, including those from coalition forces.
	"I know there is a natural tendency when such awful events occur to speculate about possible causes. I would only caution that such speculation is not only unhelpful but can be very distressing to the loved ones of those involved.
	"As is routinely the case in such circumstances, a detailed technical and Royal Military Police investigation is now under way. The Joint Helicopter Command air accident investigation team is now in place and a full board of inquiry will be conducted. I can, however, confirm that the helicopter was fitted with a defensive aids suite, as are all our helicopters in Iraq.
	"British Army units in Basra deployed immediately to the scene of the crash and secured the area with the help of the Iraqi army and police service. A crowd swiftly formed on the streets surrounding the crash site, and the House will have seen the television coverage of the volatile situation that developed over the next few hours. I am very grateful to the Iraqi authorities for the assistance provided by the Iraqi army and police to bring the situation under control, including the imposition of a curfew by the provincial governor.
	"British troops and Iraqi security forces came under attack with a variety of weapons including stones, gunfire, petrol and blast bombs, rocket-propelled grenades and mortars. It is entirely right that our troops take action to defend themselves in such circumstances. I can confirm that British personnel fired both baton rounds and a limited amount of live ammunition.
	"Seven UK personnel were injured as a result of the disturbance. According to the information I have, none of these injuries was serious. Local reports and our own sources indicate that five Iraqis may have died and approximately 28 were injured during the civil disorder that followed the crash. The full extent of UK military responsibility for any of these casualties will be clarified in due course, following completion of the post-incident review. In circumstances such as these such a review is normal.
	"I know that some commentators have concluded that the television footage we saw on Saturday is evidence that southern Iraq is rising up against the British presence and that we should withdraw all troops immediately. I do not share that assessment, but, more importantly, nor do the commanders on the ground including Major General John Cooper, in Basra.
	"To put this in its proper context, the disturbances on the ground involved a crowd of 200 to 300 people. Although magnified by the media images we saw, it was an isolated incident in a city of around 1.5 million people. Crucially, it was brought under control by the Iraqi security forces themselves in a matter of a few hours. Since then, the city has remained calm. That is testament to the commitment and bravery of the Iraqi personnel and to the work we and other members of the coalition have been doing to train the Iraqis to prepare them for taking on responsibility for the security of their own country—a country where over 12 million Iraqis showed courage in voting for a new government.
	"The House will be aware that relationships with the Basra provincial council have been difficult over the past eight months or so. Yesterday, the governor of Basra announced a return to full co-operation and dialogue between the council and British forces. Members of the council expressed their profound regret for the incident and extended their condolences to the families. This reinforces our belief that the vast majority of the people of Basra want to work with us to develop governance and security in the region. That is not to say we should be complacent; far from it. The crowd on Saturday would appear to have included elements that were armed with mortars and rocket-propelled grenades and were prepared to use them against British forces. Major General Cooper has confirmed that he is content with the numbers and capability of the troops at his disposal, but I can assure the House that we keep force levels under constant review.
	"I am also aware that some have called for the Government to set out our exit strategy from Iraq. That exit strategy has been set out before the House many times, most recently on 13 March by my predecessor the right honourable Member for Airdrie and Shotts. But let me be clear: we are still committed to remaining in Iraq as long as we are needed, the Iraqi Government want us to stay, and until the job is done. That job is to assist the Iraqi Government and their security forces to build their capabilities—military and civilian—so that they can take on full responsibility for the security of their own country. Achieving this objective is the exit strategy—nothing more, nothing less.
	"Multinational forces continue to train and mentor the Iraqis in order to develop operating effectiveness. Currently there are more than 250,000 Iraqis in their security forces, including about 115,000 in the Iraqi army. This was a serious incident, but despite that we can draw some encouragement from the fact that local forces worked with us to restore order on Saturday.
	"I will conclude by expressing again my deepest condolences and sympathy to the families of those killed on Saturday and to the colleagues they leave behind in the Royal Navy and Royal Marines, the Army and the Royal Air Force, particularly those who continue to serve with such bravery to help the people of Iraq build a secure and stable future for themselves".
	My Lords, that concludes the Statement.

Lord Astor of Hever: My Lords, I thank the Minister for repeating the Statement. I join him in sending our condolences to the families and friends of those killed—tragically, representatives from all the services. Our thoughts and prayers go out to the families of Wing Commander John Coxen, the most senior officer to be killed in Iraq; Lieutenant Commander Darren Chapman; Flight Lieutenant Sarah-Jayne Mulvihill, the first service woman to be killed in Iraq; Lieutenant David Dobson; and Marine Paul Collins.
	It is ironic that this accident happened after the Minister assured the House last week that transport helicopters in Iraq have the necessary defensive measures against ground attack. There should have been a caveat to his answer: that there is little real protection against short-range, direct-fire weapons. As every informed observer knows, the only defences are clever tactics, changing routes and height, and staying alert. Is the Minister aware that defence experts have known for some time that insurgents of the Mahdi Army have had the most up-to-date weapons, capable of bringing down helicopters?
	The situation in Iraq is deteriorating rapidly. Speed is of the essence in moving personnel, and helicopters are now being used as taxis. The Merlin seats 16 to 18 and the Chinook 20-plus. Are the Government satisfied with the defensive capability of those aircraft? The Lynx is a very old helicopter. Bearing in mind that a number of them are now also operating in Afghanistan, what assessment have the Government made of their safety and operational capability, especially in hot weather and where we are operating low-level flights without controlling the ground? When will the Minister order the Future Lynx?
	As we heard last Tuesday, there is an urgent operational requirement for more transport helicopters and aircrew. The Minister recognised the shortfall and the need to increase the number of helicopters. We cannot wait 18 months; this matter needs attention now. Will the Minister give the House an assurance that it will receive priority attention?
	Five Iraqi civilians died near the scene of the crash. Who is investigating their deaths? In the light of the recent controversial court cases, I am comforted that the Statement made it clear that our troops were right to take action to defend themselves in the volatile situation that arose.
	The Statement mentioned the difficult relationship with the governor of Basra. A number of service personnel to whom I have spoken are very critical of him and his efforts to undermine our Armed Forces at every stage. Bearing in mind that our service men and women are putting their lives at risk, can the Minister assure the House that there will now really be full co-operation from the governor and that the Government expect the governor to do everything possible to protect our Armed Forces?
	Finally, the Statement mentioned that General Cooper has confirmed that he is content with the number of troops at his disposal. Can the Minister confirm that we have sufficient reinforcements to move quickly to deal with the unexpected?

Lord Garden: My Lords, I, too, thank the Minister for coming to repeat the Statement to the House and I join in expressing from these Benches our heartfelt condolences to the families of the five people who lost their lives in the tragic loss of the Lynx helicopter on Saturday morning.
	It has been an anxious time for many service families, as all those associated with helicopter operations—by the Army, the Royal Navy, the Royal Air Force and the Royal Marines—have been waiting for the knock on their front door with bad news about their loved ones. As we now learn from the names revealed today, it has affected all branches of the services. There will also be Iraqi families in Basra mourning the loss and injuries to their families sustained during the demonstrations that followed.
	I agree with the Minister that this is not an occasion to debate where we are going with our campaign in Iraq and accept that the Minister will have few answers available to the more short-term operational concerns that arise from that loss. It is not sensible to take this single event as an indication that there is some step-change in the situation on the ground. Helicopter operations, as I know only too well, are intrinsically more hazardous than fixed-wing ones, both for technical and for operational reasons. We were unhappily reminded of that by the loss of the United States Chinook in Afghanistan, not necessarily the result of hostile action, this weekend, too.
	It is important that we determine the cause of the downing of the Lynx as quickly and with as much certainty as possible. To that end, can the Minister tell us whether it proved possible to secure the accident site continuously after the impact? From some of the media pictures, it looked as if it might not have been for some hours. Has the board of inquiry which the Statement mentioned been convened and, if so, what is the rank, and of what service, is its president? Is the present guarding of the site under Iraqi police or UK control?
	I do not expect the Minister to be forthcoming about the nature of the Lynx's mission, but the inquiry will need to consider whether the flight profile could have been a contributory factor, and I ask the Minister to confirm that the theatre command has reappraised the risks associated with whatever the particular profile was in this case. Although I agree that it is not helpful to speculate on the cause of the downing of the Lynx and whether it was the result of hostile action, will the Minister undertake to return to the House when there is a clearer picture of the cause, and to report on whether it has wider implications for operations in the south of Iraq and knock-on implications for operations in Afghanistan?
	It is, however, right to pursue one area of questioning at this stage; the noble Lord, Lord Astor of Hever, referred to it. Last week, the Minister answered an important Starred Question tabled by the noble Lord, Lord Astor, about the shortage of transport helicopters for operations. In answer to me, the Minister admitted that the MoD assessment was that there was a lift shortfall of 15 per cent. He said:
	"We are looking at a project that will aim to take decisions about the total number of battlefield helicopters during the next 18 months".—[Official Report, 2/5/06; col. 293.]
	He failed, however, to address the main thrust of my question, which was about the parallel shortage of trained helicopter crews, which is worsened by the shortage of available helicopters. The loss, too, is worsened when you consider the biographies of the five who died in the Lynx accident; three of them are very experienced helicopter people.
	We have challenging operations in hostile conditions in two theatres—Iraq and Afghanistan. They both rely on helicopters, and the tragic event on Saturday has reminded us that we must plan for attrition. I fear that we shall come deeply to regret putting off decisions for 18 months. Will the Minister undertake to make it a matter of the highest priority to get the numbers of support helicopter aircraft and trained crew up to the requirement? The ability to sustain current operations depends on it.
	Finally, I shall say a few words about the public's support for the Iraq operation. The television pictures of the jubilant demonstrators in Basra will not have helped. Indeed, those who seek to rule by the gun in Iraq know that. There may have been only a few hundred, but their leaders know the power of the global media. If the Government want support for the continued presence of our troops and for the risks of death and injury to those troops, they must be prepared to make the case that there is a long-term plan beyond waiting for something to turn up or, worse still, waiting until the United States or the Iraq Government tell us all to go home.
	In the three years since President Bush proudly but rather prematurely announced, "Mission accomplished", we on these Benches have argued for internationalising the political, economic and security forward-planning. That is becoming ever more difficult as the situation deteriorates. Will the Minister undertake to ask the usual channels to provide time for a full debate on the future of Iraq, so that we can use the expertise of this House to try to develop together a way forward that can bring some relief to the people of Iraq?

Lord Drayson: My Lords, I am grateful to noble Lords for the tone in which they have asked their questions. I will endeavour to give the fullest answers that I can and will write to them with any answers that I am unable to give today. Yes, military commanders are fully aware of the level of armament that insurgents have in Iraq. They are satisfied that our helicopters have the defences which are appropriate to their assessment of the threat. Of course, they take into account the nature of the threat that helicopter flying involves, particularly, as the noble Lord, Lord Astor of Hever, mentions, in hot weather. As the noble Lord, Lord Garden, knows, with his deep experience of flying, these matters have significant risks in terms of the operational nature of helicopter flying and the technical nature of the helicopters themselves.
	None the less, this is a time when we need to make sure that a full investigation is carried out and that we do not speculate on what has happened. We need to allow the board of inquiry to run its course. I confirm to the House that a board has been appointed. I will write to noble Lords with details of the senior officer. It is very important for us to learn the lessons that will come out of the board of inquiry and to ensure that we implement them in terms of technical, operational and tactical responses. I assure the House that operational commanders made an immediate assessment of the threat following this attack.
	The noble Lord, Lord Astor of Hever, asked about that in the context of the overall situation relating to our helicopter fleet and orders of Future Lynx aircraft, which is under current consideration in the Ministry of Defence. We anticipate being able to progress the Future Lynx project shortly, but significant negotiations still have to be completed. However, I take the noble Lord's point about it taking 18 months in order to take a decision. I give this House an assurance that I will look at whether that timeframe can be shortened and what we can do to shorten that decision process.
	I can tell the House that I regard the situation regarding helicopters, particularly battlefield helicopters and helicopter lift, as of the highest priority. Only on Friday I looked at this project as part of an overall view at the DLO. The noble Lord is right that this is not just a matter relating to helicopters. Of course, we are making improvements on serviceability, which are providing benefits. But we also have to look at the way in which we run our air crew training and the pressure that we have with the 15 per cent shortfall, which I mention in terms of home training. We are looking at the whole process by which we carry out helicopter and military flying training overall to see whether we can get efficiency improvements here.
	The noble Lord, Lord Garden, asked about the details on the accident site. Once we have full detailed information, I will write to the House and answer questions relating to the security and guarding of the site. I stress to the House that it is important that we do not come to any conclusions speculating on what happened in this case. We recognise the significant progress which we have made in supporting the Iraqis in their transition to democracy. From what happened at the weekend, we can see that the Iraqi forces themselves were clearly involved in returning the situation to calm and, specifically, the governor of Basra established normal and strong relationships with coalition forces, which are both positive signs. However, as I said in the Statement, we cannot be complacent. It is vital that we maintain the progress that we have been making. I am sure that the House will support us in that.

Lord Maginnis of Drumglass: My Lords, I join other noble Lords in expressing sympathy for those who lost their lives in this incident. While I am not competent to speculate on helicopters and that type of operation, I feel I am competent to comment on what I saw reported on television of what happened on the ground after the incident. It struck me that insufficient troops were available to provide back-up. When I see our troops having to withstand missile and petrol bomb attacks at close quarters without a firm foot on the ground to control those hurling such objects, I cannot believe that we have adequate personnel to deal with these incidents. It was quite unusual to see soldiers moving towards an incident and being pursued by missile-throwing youths. That is not what we want for our soldiers on the ground in Iraq. Can the Minister assure us that proper back-up is available for the infantry? The last thing we want to see—and I have seen it before—is a soldier being surrounded by a mob, kidnapped and spirited away to a horrible death. The potential for that is what I fear I saw when watching the report on Saturday.

Lord Drayson: My Lords, I am happy to provide noble Lords with that assurance, and I do so knowing that over the weekend my right honourable friend the Secretary of State had several conversations with General Cooper as the situation developed. This morning I discussed those talks with my right honourable friend. To put it bluntly, they underlined the fact that the senior British commander on the ground is content with both the capabilities and the number of UK troops he has at his disposal. We also have all the necessary contingencies in place in terms of reserve forces, should they need to be deployed. I can assure the House that we keep force levels under constant review, based on the advice Ministers receive from the commanders themselves.

Lord Craig of Radley: My Lords, I thank the Minister for repeating the Statement and I share in the sense of sorrow and sympathy for the families of those whose lives have been lost. I was glad to hear the assurance given in the Statement that the situation in Basra is not just as we saw it on our television screens the other night, but that it is reasonable, with a good degree of co-operation with the governor. That underlines strongly the efforts being made by our own forces and the coalition forces to build up relations in that part of Iraq.
	However, there have been a number of reports in the press of inadequacies, such as body armour not being available and that a Hercules aircraft unhappily shot down had not been provided with the right protection against a fire outbreak in its fuel tanks. Indeed, on that occasion, before the full board of inquiry conclusions came out, one was led to believe that adequate protection had been provided. The Minister has just suggested to noble Lords that adequate protection is in place for our Lynx helicopters. I hope very much that when the board of inquiry reports, that will indeed prove to have been the case in this instance. More generally, does the Minister agree that when our forces face hazardous operations, there can be no excuse whatever for any penny-pinching or short-changing on the essential protective measures and equipment with which they should be provided?

Lord Drayson: My Lords, I am grateful to the noble and gallant Lord, who knows from his own experience the challenges that our troops face. I absolutely agree that there is no excuse for failure to provide our troops with the equipment they need to do their job properly. We are doing that in response to the threats as they emerge and change. The threats have presented us with significant challenges in certain areas and we need to respond to them with speed and diligence. We need to learn any lessons which may come out of the board of inquiry and apply those lessons speedily to our helicopters if that is required.

Baroness Dean of Thornton-le-Fylde: My Lords, I, too, express my total sympathy, not only for the service personnel but for the families of those who were so tragically killed in the crash. Of course, we cannot express views about what happened and why until the court of inquiry is finished but, in my view, it is a pity that it has taken such a tragic incident to get the provincial council to say that it will take part in a full dialogue and offer co-operation. Other than this expression of what it intends to do, what else do we have in place? It is no good just expressing concern and profound regrets for the incident; what is backing that up in terms of day-to-day operations and co-operation with the provincial council and our service personnel in Basra?

Lord Drayson: My Lords, my noble friend is right. We are pleased to see the statements that have been made but they need to be backed up with full action with regard to the day-to-day challenges faced by our forces and the Iraqi security forces themselves. This needs to take place in the way in which operations are undertaken and the way in which the development of training is progressed. We are pleased that more than 250,000 Iraqi security forces personnel have now been trained. However, their capability, and the speed at which they are able to take over full responsibility for the security of their own country such that we can progress handover, is very important. We need to see these positive words translated into action on the ground.

Lord Campbell-Savours: My Lords, we are all saddened by the tragic loss of life, both British and Iraqi. Is it the practice of Ministers to visit military personnel within the United Kingdom who are about to leave for a tour of duty in Iraq and explain to them, as part of a morale-raising exercise, precisely what our objectives are in Iraq? If it is our practice, how often do Ministers make such visits?

Lord Drayson: My Lords, it is the practice for Ministers to visit troops before going onto operations. It is also the practice to meet them after they have returned from operations and to meet them while they are on operations. I will write to the noble Lord and give him the details of how frequently that has happened. For myself, my visit to Basra last summer and the time I have spent visiting troops in the United Kingdom have been absolutely fundamental to my understanding of the challenges that they face and in making sure that everything I do in my ministerial responsibilities supports them as well as I can.

Baroness Crawley: My Lords, I beg to move that the House do adjourn during pleasure for five minutes.

Moved accordingly, and, on Question, Motion agreed to.
	[The Sitting was suspended from 4.40 to 4.45 pm.]

Northern Ireland Bill

Lord Rooker: My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved accordingly, and, on Question, Motion agreed to.
	House in Committee accordingly.
	[The Deputy Chairman of Committees (Baroness Gould of Potternewton) in the Chair.]
	Clause 1 [Preparations for restoration of devolved government]:

Lord Laird: moved Amendment No. 1:
	Page 1, line 9, at end insert ", including matters relating to the implementation bodies, as defined in section 55(3) of the 1998 Act"

Lord Laird: The purpose of the Bill is to create a devolved Assembly in Northern Ireland. In that process, there is a preliminary period when confidence must be created, an idea which I understand and support. The purpose of my amendment is to create confidence in an area in which scandals have abounded—the cross-border bodies.
	The Bill says that the Secretary of State may refer items to the Assembly during its initial period. I understand that that could include the activities of the cross-border bodies. However, I would like to be slightly more specific so that pressure is put on the cross-border bodies about what precisely is going on.
	Cross-border bodies are an essential part of the Belfast agreement. Command document 4705 of the agreement states:
	"an Assembly in Northern Ireland, a North/South Ministerial Council, implementation bodies, a British-Irish Council and a British-Irish Intergovernmental Conference and any amendments to the British Acts of Parliament and the Constitution of Ireland—are interlocking and interdependent and that in particular the functioning of the Assembly and the North/South Council are so closely inter-related that the success of each depends on that of the other".
	I am not sure what success is being considered here, because most of the cross-border bodies have done very little, spent a lot of money and, in the recent case of InterTradeIreland for instance, have been accused of putting pressure on a small number of Protestant or unionist employees. They have written to the Secretary of State to ask for some kind of inquiry.
	My amendment would bring some kind of control and stability to a number of the bodies. The implementation agreement, Command document 4706, states in reference to Waterways Ireland:
	"In exercising its functions the Body"—
	that is, Waterways Ireland—
	"will at all times act in accordance with any directions (whether of a general or specific nature) given by the NSMC".
	From an Answer to a Parliamentary Question, I have discovered that, during the six years of the existence of that cross-border body, the council has been given no directions at all. So it is bound to be out of control. I have indicated previously that a litany of problems exists at Waterways Ireland, including bullying, appointments on a religious and/or political basis, the rewriting of reports and even the proposed move of its headquarters to the Irish Republic. All this is regrettable.
	My amendment would allow some UK involvement in the oversight of what is going on here. The difficulties at Waterways Ireland have moved on and it is widely believed by members of staff in Waterways Ireland and by those who are on the periphery that the organisation is now being run by the Knights of Columbanus, even with the support of an organisation called Opus Dei. This is extremely embarrassing and damaging to the whole concept of the Belfast agreement.
	Is not accepting my amendment a small price to pay to achieve some sort of clarity on these issues, so allowing confidence to return? I beg to move.

Lord Smith of Clifton: I shall speak to Amendments Nos. 1 to 4 in my name and that of my noble friend Lady Harris of Richmond. I accept that some of the issues being raised by the noble Lord, Lord Laird, need to be further investigated. There is some concern, particularly with the waterways. But in I think that we have always thought that the whole future prosperity of the island of Ireland lies in increased cross-border collaboration. We are fully supportive of the fact that the Ministerial Council has continued during the absence of the Assembly, though it is regrettable that without the Assembly there is much less accountability. That is what the noble Lord, Lord Laird, has drawn attention to.
	Clauses 3 and 4 of the Bill provide the Secretary of State with a broad power to make any consequential provisions under the Bill by means of statutory instrument. The Explanatory Notes say:
	"Clause 3 provides for the Secretary of State to make by order any supplementary, incidental or consequential provision and any transitional or saving provision that may be needed as a result of the Bill. Clause 4 provides that the power is exercisable by affirmative resolution, statutory instrument, with the possibility of expedition, for orders containing amendments or repeals of Acts or Northern Ireland legislation. Otherwise, it is exercisable by negative resolution procedure".
	In other words, if the Secretary of State considers it expedient, he can do anything he likes. The Explanatory Notes say:
	"This power is mainly intended to be used to make . . . any changes that may be needed in consequence of the amendments made by Schedules 2 and 3, and . . . any transitional or saving provision that may be required as a result of the repeal of the 2000 Act".
	If this is what these clauses are supposed to be used to achieve, why can this not be made explicit on the face of this Bill? Is there anything else that the Government intend to use this power for? Can the Minister assure the House that the enabling powers given to the Secretary of State are circumscribed by reference to the purposes of the Bill and, therefore, would lapse within the time limits in the Bill? This is a broad power and we should not be expected to accept it without further explanation.
	Amendment No. 2 is based on the Motion tabled in another place by the honourable Member for South Down, Lady Hermon. It tackles the same issues we deal with under Clauses 3 and 4—the very wide powers that are being given to the Secretary of State under this Bill. Paragraph 4 of Schedule 1 allows the Secretary of State to determine the proceedings of the Assembly. The Delegated Powers and Regulatory Reform Committee of the House of Lords published its 18th report, which considered this Bill, on Thursday 27 April. That committee draws attention to paragraph 4 of Schedule 1 and the powers it gives to the Secretary of State to determine the conduct of proceedings of the Assembly. The report states:
	"These directions may contain provisions that are substantive and not just of a procedural nature. For example, they may include requirements as to the majority required for election".
	Although the Bill does not prescribe what, if any, directions must be given in this respect, paragraph 4(3) and (4) of Schedule 1 specifies that a particular use of the power may be to require provision correspondent to Sections 16 and 18 of the Northern Ireland Act 1998, which set out the majorities required in elections and the formula for filling ministerial offices under the Act. The committee's report stressed:
	"We draw to the attention of the House the significance of the power to give directions so that Ministers may, if the House thinks fit, be asked for a fuller explanation of the intended use".
	We would like the Minister to comment on that power and its use. We are concerned that the Secretary of State has taken the power upon himself, meaning that the Assembly is not able to decide such matters for itself.

Lord Maginnis of Drumglass: I shall speak to Amendments Nos. 3 and 4 and try to explain their purpose. As I made clear at Second Reading, I totally support the Government's Bill. I want to see a restoration of the Northern Ireland Assembly and to see things working democratically there. On that point alone, I must support the noble Lord, Lord Smith of Clifton, in so far as he cautions against absolute power being vested in the Secretary of State. With direct rule, we have seen the results of that absolute power. I sometimes think that the Secretary of State might use the expression, "It seemed a good idea at the time", because much of what is attempted, although a good idea at the time, is totally lacking in planning and structure. Hence, we finish up with something that is quite inadequate to the needs of the people of Northern Ireland. I drew attention to that a week ago when we debated the boundaries order and I shall return to the subject, although I hope not when we debate the education order.
	I want to see proper democracy in Northern Ireland. To that end, I have tabled Amendments Nos. 3 and 4. When there is an election to the Northern Ireland Assembly, the normal procedure is for the Assembly to come together and for parties to identify themselves in groups for the purpose of implementing the d'Hondt procedure. Under that procedure, ministerial posts are allocated pro rata according to the strengths of the parties. The Secretary of State, in his draft regulations—they are not part of the Bill but they must be taken into consideration—suggests that the strengths of the respective parties should be determined not according to the results of the previous Assembly elections, which were quite some time ago, but according to the strengths of the parties next Monday morning. We believe that that is unhelpful. It was not intended to be—it seemed like a good idea at the time—but it will be unhelpful.
	Either we go back to what the people of Northern Ireland voted for at the previous elections and say that that is the strength of the groups and that the d'Hondt procedure will take place on that basis; or we recognise that we are entering a six-month process in which people with huge differences must reach agreement and make arrangements for co-operation and coalitions. It would be wrong to say next Monday morning, "Sorry, guys, you can talk about what you like for the next six months but where you are now is set in stone". For that reason I have tabled Amendment No. 4. It is my preferred amendment of the two amendments that I have tabled. Amendment No. 3 says, "Let us get back to where we were at the time of the election because that is custom and practice". However, I recognise that there will be a huge time gap before the Assembly comes together. Therefore, I hope that the Minister will reassure me that he will not require groupings to identify themselves until the day when the d'Hondt system is to be implemented, or at about that time.

Baroness Harris of Richmond: I wish to speak to Amendments Nos. 3 and 4. As I understand it, and following what the noble Lord, Lord Maginnis of Drumglass, has just said, the d'Hondt mechanism for choosing Ministers depends on a party's numbers. Numbers have never been my great forte so I find that system difficult to understand. But as I understand it, if d'Hondt was run using the strength of the parties as they were in 2003, as the noble Lord, Lord Maginnis, said, the executive would comprise three DUP members, three UUP, two Sinn Fein and two SDLP.
	However, if it was run using the strength of the parties as they are now, the executive would comprise four DUP members, two Sinn Fein, two UUP and two SDLP. So as well as losing a seat on the executive to the DUP, the UUP would be further disadvantaged as it would be further down the pecking order for choosing ministries. Although the UUP now has the same number of seats as Sinn Fein, Sinn Fein gained more first preferences during the election in 2003. When parties are tied under d'Hondt, the party with the biggest number of first preferences is deemed to be the larger. I see that the noble Lord, Lord Maginnis, agrees with my interpretation of that. So instead of choosing the second ministerial position, the UUP would pick up the third, after the DUP and Sinn Fein. No wonder this needs to be clarified. I am sure that the Minister will look closely at what I have said and perhaps write before we reach the next stage of the Bill to confirm whether my interpretation is right.
	It could be argued that a precedent was set during the course of the 1998 Assembly because, initially, Robert McCartney's part of the UKUP was elected with five members of the Assembly. However, during the course of the lifetime of that Assembly, the four other members split away from McCartney and formed the NIUP. But that did not affect how the executive or committees were constituted as it was decided that for the purposes of d'Hondt you were a member of whichever party you were in when you signed the roll on the first day. If that logic was applied to this situation, as the Assembly has not sat since it was elected in 2003, parties would be signing the roll in May and, therefore, would sign in as a member of whichever party they belong to now. I hope that the Minister has followed what I have said.
	This situation demonstrates that the d'Hondt mechanism is not a particularly good way in which to allocate seats in an executive. D'Hondt also throws together parties that may not want to work together. As the 1998 Assembly demonstrated, there was absolutely no sense of collective responsibility in the executive; Ministers simply did their own thing. It would be much simpler all round if there was a voluntary coalition. Under those circumstances, parties would at least have come together by choice, they could negotiate a programme for government together, and we could achieve some kind of cohesion in the governance of Northern Ireland.

Lord Hylton: On Amendment No. 1, it seems to me that Ministers, both in the United Kingdom and in the Republic of Ireland, should be responsible for the supervision of the cross-border bodies. If that does not always take place, we have the Auditor-General, the National Audit Office, the Ombudsman and probably the Northern Ireland Human Rights Commission on which to fall back to redress any matters that are thought to be going wrong. It also occurs to me that not all cross-border matters are, in fact, devolved. Therefore, they could not all be the responsibility of the Assembly. As to Clauses 3 and 4, I agree with the noble Lord, Lord Smith of Clifton, that they are too widely drawn. I dare say that they could provide a bad precedent when we come to considering at some point in the future the deregulation and reform Bill. We should keep to the time-honoured principle that secondary legislation should not amend primary legislation.
	On Amendment No. 2, the paragraph that is being objected to seems to negate the right of the elected Assembly, and again seems too widely drawn. How the Assembly should conduct its proceedings should surely be a matter for negotiations between the Secretary of State and the Assembly.

Lord Glentoran: I have very few words to say on this. First, the noble Lord, Lord Laird, has aired his amendment many times here, and if it was going to be helpful to include it in the paragraph that his amendment recommends, I would agree with it. Generally, we were very concerned at the breadth and the Henry VIII-type clauses that were included in the Bill. As noble Lords will know, the Constitution Committee under the noble Lord, Lord Holme of Cheltenham, raised this matter, and I was pleased to read the Government's response this morning. It has been well raised and well recorded in Hansard, and on this occasion I will put my faith in the Government not usurping their powers in the next period of the Bill.

Lord Rooker: We would never dream of usurping our powers, which are incredibly circumscribed and much more limited than they might appear at first sight. I am grateful to those noble Lords who have spoken and I believe that I can answer to satisfaction all the points that have been raised.
	The Assembly's key task—the Assembly that is starting on Monday 15 May—will be to elect a First Minister and a Deputy First Minister and then ensure that the remaining ministerial portfolios are filled on restoration. Clause 1 empowers the Secretary of State to refer other matters to the Assembly that he considers appropriate, and he has said that he is willing in principle, in the light of consultation with the parties, to refer matters that will feature prominently on the agenda of a devolved Assembly and Administration in Northern Ireland. We are quite flexible about that.
	Through Amendment No. 1, the noble Lord, Lord Laird, is seeking to ensure that the Secretary of State may refer to the Assembly matters relating to the north/south implementation bodies, as defined in Section 55(3) of the 1998 Act. The noble Lord's views on the north/south bodies are well known, and I have been made well aware of them in the 12 months that I have been responsible for answering for the Northern Ireland Office in your Lordships' House. The noble Lord has had an opportunity to ventilate those views again today.
	As I have said, the subjects that will be referred to the Assembly will be a matter for consultation with the parties. That is important. I am not therefore in a position to give guarantees that the issues raised by the noble Lord will be referred to the Assembly, but I will ensure that the Secretary of State is aware of his comments in the debate. I think that we would both agree that the best way of ensuring the full accountability of the north/south bodies—I agree with him that they need to be fully accountable—is to restore a fully-functioning devolved Assembly. That is by far the best way—moreover, that can come pretty quickly. We will not stand in its way. We know we have the November deadline, but if Members of the Assembly want to get back before the end of this month, there will be no problem. Indeed, we will do everything we can to facilitate a fully functioning devolved Assembly.
	However, the noble Lord's amendment seeks to confer on the Secretary of State a power which Clause 1 already gives him. That is the point—the Secretary of State can do that because he can refer to the Assembly "such other matters" as he thinks fit. That drafting would, as it stands, allow him to refer to the Assembly the sorts of matters that the noble Lord raised. Therefore, we see no need for the amendment. We are quite flexible about this. We want the Assembly to discuss matters over the summer; but the best way to achieve the accountability of those bodies is to have a fully functioning devolved Assembly.
	The noble Lord, Lord Smith of Clifton, and the noble Baroness, Lady Harris, through Amendment No. 2, would appear to seek to remove the Secretary of State's power to make directions in relation to the operation of the Assembly under the Bill. Paragraph 4 is designed to permit the Secretary of State, among other things, to set the standing orders for the Assembly. As I acknowledged at Second Reading last Tuesday, the Secretary of State's powers in this area do at first appear to be broad. The Delegated Powers and Regulatory Reform Committee has understandably and rightly drawn your Lordships' attention to them, though not with any suggestion that they were unjustified in the context. That is what we must be mindful of—the context of this Bill is time-limited.
	Those powers might well be questionable if they related to the Assembly under devolution, but they are necessary, in the present, very special, context. Next Monday, the Assembly has the essential function of selecting the executive and otherwise preparing for restored devolution. It does not make sense to require the Assembly first to deal with distractions beyond that, such as determining complex sets of standing orders. That would muddy the waters. There are wide divergences of opinion among the parties at present and it is almost an invitation for them to become bogged down in this issue by taking their mind of the main purpose of what the Assembly is returning for—especially since voting on standing orders, under the 1998 Act, requires cross-community support.
	We not believe that there is a great groundswell of opinion among the parties suggesting that this issue be left to them. But, crucially, as soon as the devolved Assembly comes back—and that could be by the end of this month if the parties were so minded; they do not have to wait until the autumn—it will have back its old standing orders and it will be master of them. That will not require anything from the Secretary of State. That is the key issue. Given that they are meeting for a specific purpose, it would not suit anyone for Members of the Assembly to get bogged down in standing orders now. That is not the main thrust of the Bill.
	As I said last week, we have published drafts of the standing orders that we propose to make and they have been placed in the Library and the Printed Paper Office. They reflect as far as possible the standing orders of the Assembly before its suspension in October 2002. We have received representations from the parties about them and I understand that work on them was carried out quite late over the weekend as things came into the office in the darker hours of the day. We have taken note of the points made in both Houses of Parliament and we will produce a revised version of the standing orders later this week. I hope that it will be available by the middle of the week but I cannot specify whether it will be ready on Wednesday or Thursday. However, there is no reason for us to delay.
	The point is that we stand ready to make further amendments if that becomes necessary in the days and weeks ahead, again taking account of party views. So, when we publish the standing orders later this week, it is not the case that that will be it for this Assembly all the way through to November. We can amend the orders and we will discuss that with the parties as and when necessary.
	I hope that Members of the Committee are reassured that, although the powers that we seek are substantial, they are what the situation demands. They are only for this specific situation and not for the future running of a fully functioning devolved Assembly. As I said, they are temporary, like the rest of the Bill. After 24 November, or earlier if we are lucky and the move to devolution is quicker, they will be a matter of history because the Assembly will be master of its own standing orders.
	I always hate having to use these arguments but, when you are in opposition and drafting amendments, you cannot always take account of everything that you need to do. However, the amendment would leave the Bill silent on where the Assembly's rules and procedures should come from, and the Assembly would not have any authority under the Bill to determine its own standing orders because it is not the fully functioning devolved Assembly. So there could be a difficulty as it could lead to a chaotic situation in which the Assembly could achieve nothing at all. I appreciate that no one in the Committee wants that.
	One area where we intend to make a minor change to the standing orders is in relation to party strengths regarding nominations under the d'Hondt process, by which Ministers are chosen, apart from the First Minister and Deputy First Minister. Through Amendments Nos. 3 and 4, the noble Lord, Lord Maginnis, has sought to ensure that party strength is assessed either in relation to how things stood at the time of the last election in 2003 or on the date that the d'Hondt procedure is run. I am grateful to the noble Lord for raising this issue at Second Reading—I do not think that it was referred to during the passage of the Bill in the other place.
	As noble Lords will understand better than I do, the Northern Ireland Act 1998 provides for party strengths to be assessed, for d'Hondt purposes, on the first day that the devolved Assembly meets. That is necessarily very close to the date that d'Hondt is run because standing orders for the devolved Assembly require it to happen within seven days. Our draft standing orders stayed in line with the 1998 Act by setting party strengths at day-one levels, but, under the arrangement that we plan, d'Hondt would not run until after a successful election had taken place for the First Minister and Deputy First Minister. We hope that that will come early in the life of the Assembly but it could come later. So, on reflection, we think it would be more faithful to the devolved arrangements to amend the draft standing orders—that is, the draft standing orders published last week, which will be revised this week—to ensure that party strength will be assessed on the date that d'Hondt is run. You cannot get more up to date than that and it allows for some of the things that the noble Lord, Lord Maginnis, mentioned at Second Reading last week to take place.
	I hope that that satisfies the noble Lord as it meets the central point of his argument. Things have changed in some ways since the elections to the Assembly, which were held some time ago. Although I do not know all the details, I understand that party strengths have varied. I hope that I have satisfied noble Lords about the fact that powers given to the Secretary of State are very circumscribed by the legislation because they can be used only in the context of this legislation, which is time-limited anyway. We are working for success; we are not working for 50:50 or ifs and buts. Success means getting a fully devolved Assembly back before the deadline date of 24 November. The sooner Members of the Assembly are back the sooner they can be in charge of implementing that reform and the principles of it.
	We will not stand in their way. We will not drag things out to September or October to suit our circumstances. If they want to be back by the end of this month or during June to sit before the summer Recess, Ministers will facilitate that. That is what the Bill is about. That is the measure of success from our point of view—not failure. That is meant in the most goodwill spirit that I can summon for the elected representatives of Northern Ireland to get to do the job. Most people who are elected want to pull the levers of power, and we want everybody in the Assembly to share that view.
	I hope that I have been able to satisfy noble Lords on this group of amendments.

Lord Laird: I thank all those who have taken part in the discussion of Amendment No. 1 and I thank the Minister for giving me the response that I expected.
	The noble Lord, Lord Hylton, raised some worthwhile points. On a number of occasions the activities of some of the cross-border bodies were referred to some of those organisations. However, there was an unsatisfactory response. The chief executive of Waterways Ireland was found guilty of bullying a member of staff. The chief executive was given a 35 per cent pay increase, and the member of staff got the sack. That is only one example of what can happen.
	In Northern Ireland we have gone to a lot of trouble, which I totally support, to ensure that nobody can be put into any position on grounds of religion or political views. Yet, that is what happened in Waterways Ireland without competition. Because they are cross-border bodies, nobody seems capable of doing anything. Everyone is paralysed.
	It is time that such things were considered because they do not provide a sense of confidence for the good people of Northern Ireland. They could blight the prospect of creating enough confidence to start the mechanism of devolution again by the end of November.
	I take heart that the Minister will refer these issues to the Secretary of State. I am pleased about that and have no doubt that he will put the weight of our views in this House to the Secretary of State. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 1 agreed to.
	Clause 2 agreed to.
	Clause 3 [Power to make consequential provision etc]:
	On Question, Whether Clause 3 shall stand part of the Bill?

Lord Smith of Clifton: We are content that the clause stands part in the light of the Minister's assurances.

Clause 3 agreed to.
	Clauses 4 to 6 agreed to.
	Schedule 1 [The Assembly]:
	[Amendment No. 2 not moved.]

Lord Maginnis of Drumglass: had given notice of his intention to move Amendment No. 3:
	Page 5, line 10, at end insert "but in any such provision the number of members of the Assembly of a party shall be determined as that obtaining on the morning of the day for the making of the nominations referred to in section 1(1)(b) of this Act"

Lord Maginnis of Drumglass: I thank all those who have participated in the debate, and I thank the Minister for his response to Amendments Nos. 3 and 4. His comments were most helpful and I shall not be moving the amendments.

[Amendment No. 3 not moved.]
	[Amendment No. 4 not moved.]

Baroness Harris of Richmond: moved Amendment No. 5:
	Page 5, line 20, at end insert—
	"Assembly control of Orders in Council
	7 For paragraph 2 of the Schedule to the 2000 Act substitute—
	"Parliamentary and Assembly control of Orders in Council
	2 (1) Except where sub-paragraph (2) applies, an Order in Council may not be made under paragraph 1(1) unless each of the following conditions is met—
	(a) condition 1 is that a draft of the Order has been referred under section 1(1) of the Northern Ireland Act 2006 to the Assembly;
	(b) condition 2 is that a meeting of the Assembly has taken place at which it has had the opportunity to consider the draft of the Order;
	(c) condition 3 is that the Assembly at that meeting has not expressed by resolution passed with cross-community support its opposition to the draft of the Order;
	(d) condition 4 is that the draft of the Order has been approved by resolution of each House of Parliament.
	(2) This sub-paragraph applies where the Order declares that the Secretary of State has advised Her Majesty that because of the urgency of the matter it is necessary to make the Order without meeting any of the conditions in sub-paragraph (1).
	(3) Where an Order contains a declaration under sub-paragraph (2) it—
	(a) must be laid before Parliament after being made; and
	(b) ceases to have effect if it is not approved by a resolution of each House of Parliament before the end of the relevant period.
	(4) Where an Order contains a declaration under sub-paragraph (2) it—
	(a) must be referred to the Assembly under section 1(1) of the Northern Ireland Act 2006 after being made; and
	(b) ceases to have effect if before the end of the relevant period—
	(i) the Assembly has not had an opportunity to consider the Order; or
	(ii) the Assembly has passed a resolution with cross community support expressing its opposition to the Order.
	(5) But sub-paragraphs (3)(b) and (4)(b) do not prejudice—
	(a) anything done under the Order before it ceased to have effect; or
	(b) the making of a new Order.
	(6) In this paragraph—
	"the Assembly" means the Assembly referred to in paragraph 1 of Schedule 1 to the Northern Ireland Act 2006;
	"the relevant period" means the period of 40 days beginning with the date on which the Order is made.""

Baroness Harris of Richmond: When the Bill was discussed in another place, it attracted support from all the Opposition parties, including all the Northern Ireland parties represented on the Committee. Clause 1(1)(c) allows the Secretary of State to refer such other matters as he thinks fit to the interim Assembly. Paragraph 8 of the joint statement made on 6 April by the Prime Minister and the Taoiseach states that:
	"It would of course also be open to the Assembly to prepare for Government by considering issues which the Executive will have to deal with, such as future economic strategy, water rates, public administration and education. Ministers would naturally take account of views which command cross-community support within the Assembly".
	This amendment essentially gives effect to that statement.
	It is difficult for people to put much weight on such verbal assurances from the Government because they have consistently failed to respect the will of the parties as clearly expressed on a cross-community basis outside the Assembly during suspension. For example, when the Northern Ireland Grand Committee of another place discussed the order introducing top-up fees to Northern Ireland universities, the Government lost a vote on the order by one vote. Yet top-up fees in Northern Ireland were simply pushed through by Ministers in Westminster. How are we to believe that the Government will respect the views of Members in the interim Assembly? That is what we are seeking to test by this amendment.
	The amendment would allow the interim Assembly, on a temporary basis, to veto Orders in Council. The veto would not be in the hands of one party or another, or in those of one section of the community. It would not only have to command the support of the majority of Members of the Assembly, but also the support of the majority of the designated unionists and designated nationalists in the Assembly. It would also give the Members of the Assembly an incentive to come together and work on the bread-and-butter issues for which the Assembly will eventually have to take responsibility. If the clear and overwhelming view of the Assembly on such matters has no binding impact on what the Government do, it is difficult to see how Assembly Members will be motivated to work. Further, as this is a temporary power, as we have already heard, the veto would lapse on 25 November if no executive is formed. Surely, it would concentrate the minds of Assembly Members to come to an agreement if they knew that they would not retain the ability to have an impact on Northern Ireland policy if they did not form an executive. These Benches believe that another advantage of this amendment is that it would give Members of this House and another place a clear indication of what the Assembly thinks about the policies that we debate here.
	We have said on many occasions that the scrutiny of Orders in Council is seriously inadequate. In autumn last year, the Secretary of State wrote to our colleague in another place, the honourable Member for Montgomeryshire, asking for suggestions on how the scrutiny of Orders in Council could be improved. We responded on 2 November with a number of ideas on how to bring the views of the political parties in Northern Ireland to the attention of both Houses of Parliament adequately. My honourable colleague in another place received a response from the Secretary of State on 25 March, almost five months after our suggestions were sent to the NIO. It states:
	"Thank you for your letter of 2 November setting out your suggestions for increasing parliamentary scrutiny of Northern Ireland business. I apologise for the long delay in sending you this further reply.
	"I fully agree that the current arrangements are not ideal particularly during Direct Rule. So, I welcome your constructive suggestions.
	"As you know I have made it clear that we have to make progress towards devolution during 2006 and that the scheduled elections cannot take place in May 2007 if the Assembly is not restored. I remain hopeful of making the progress that will pave the way to restoration, which in turn would clearly change the terms of the discussion about making significant changes to the way in which we legislate for Northern Ireland at Westminster.
	"I expect an announcement by the two Prime Ministers shortly, on which I will of course brief you in detail nearer the time.
	"I will review the situation again later this year when we should have a clearer idea as to the chances of success. If there appears to be little prospect for a successful restoration of the devolved institutions at that juncture, I will want to talk to you and the other parties to discuss the necessary changes".
	In other words, in the event of the Assembly not forming an executive in November, a year will have passed since we made our suggestions before any action will be taken to even consider what we put forward.
	We cannot go on like this. We cannot keep legislating for Northern Ireland by the Order in Council process. It is totally ineffective. The amendment we move today will at least improve the scrutiny of those orders on a temporary basis. I beg to move.

Lord Glentoran: I have a great deal of sympathy with the words of the noble Baroness, but I am afraid that I do not think that the amendment to this Bill at this time will help procedures in the Northern Ireland Assembly when it reassembles. I would love to pass the buck today, as I am sure the Minister would, to the Northern Ireland politicians to make up their own minds and to run their own show. If, on 24 November, we are back to square one, I sincerely hope that the Government and, indeed, the opposition parties will be able to find a better, more efficient and more democratic way of managing the affairs of Northern Ireland.

Lord Tebbit: I have to confess that I am not one of the most optimistic people as regards what will happen after this Bill is enacted. There are still some very grave doubts about the sincerity of some of the politicians involved, particularly their attachment to the process of law and order, and their commitment to law and order in the Province. With that in mind, we must accept that there is at least a possibility that the legislation will not be successful in getting devolved government up and running again, therefore I have a great deal of sympathy with the amendment. It would set a precedent, not really for this interim period—frankly, I do not think that is worth doing; it is just muddying the waters—but if this collapses and we have to go back in the long term for direct government, we would have much better ideas about how to handle the procedures for it than at the moment.
	I hope that the noble Lord, Lord Rooker, will express his sympathy, at the very least, for what is intended here: improving how these matters are handled during the period of direct rule, whether it be short or long.

Baroness Park of Monmouth: I would only add what I said when we discussed the Bill before. I feel great sympathy with the amendment. It is unlikely to encourage people in Northern Ireland to rule themselves and to get on with it if the Government meanwhile enact such decisions as those made on education, which were discussed at Second Reading, without waiting at least to give the Assembly the chance to say what the people of Northern Ireland want. It is not really respecting democracy on the one hand to say, as the Prime Minister has, that it is obviously nonsense to make decisions that may have to be changed by the Assembly, but on the other hand to continue to do it. I hope very much that the Government will feel able to refrain from taking actions which might need to be reversed. If they do so, it makes a much stronger argument for the Assembly to get on with it.

Lord Maginnis of Drumglass: I add a few words to those spoken with very good sense and great understanding by the noble Baroness, Lady Park. I have considerable sympathy with this amendment in that, however robust the Minister intends to be about moving matters forward, it would be absolute and utter folly to attempt to make major legislative changes during the six-month period when what we call the Assembly—not the real Assembly but the Assembly Members negotiating with each other—is functioning. I hope that the Minister, when he responds to the noble Baroness, Lady Harris, will consider the intention of the amendment and assure us that, however robust he and his colleagues may be in the Northern Ireland Office, they will not in that interim six-month period seek to override the intention of those Members of the legislative Assembly meeting to negotiate a way forward.

Lord Rooker: I accept the invitation of the noble Lord, Lord Tebbit, to express sympathy with the principle behind the amendment. The Government's view is that the present situation is unsatisfactory for scrutinising Northern Ireland legislation. On two occasions in the past 12 months we have talked with the other parties to see what ideas we could develop on better quality scrutiny of the legislation in both Houses. Discussions have gone on in both Houses. We have not come up with lots of new solutions, and I accept that the present situation is not satisfactory, but the situation in Northern Ireland is not satisfactory either. That is the point we have got to.
	The Assembly's position for the next few months is unique and time limited. I can see the seductiveness of the moves behind the amendment, but in reality it is not practical. We are operating with good faith, as the Secretary of State has said, in terms of referring matters to the Assembly—water charging, the review of public administration, education or other matters. What we cannot and will not do during this period—it may not be six months; it could be six weeks—is abdicate our responsibility for governing. If this amendment were accepted, we would be faced with a very difficult situation because it would provide in effect—and I think that the noble Baroness used the words—a power of veto over the legislation before it comes to Parliament. It may not just be over the legislation; there are other changes under way.
	As I said on a previous amendment, the motivation is there for the Assembly to get back to taking decisions on behalf of the people of Northern Ireland. We will not delay that a day longer than necessary. It is very seductive. We have heard the voices asking us to take the Assembly seriously on contentious devolved issues; and we want to take account of them. For the past 12 months we have discussed different issues and had briefings; I have taken part in some. But we would be wrong if we did not listen, given that devolution may be only a matter of months away. So it would be quite wrong if we were not taking matters seriously. But there is a big difference between that and giving formal powers to an institution that does not have government responsibilities.
	Some of those decisions have financial consequences. The budget has been set for this year and next year. If there are any reductions in charges on certain sections of society, there will have to be increased charges on others. The Assembly could vote on the one but not have responsibility for the other. That would leave us in an incredibly difficult position. The answer to that is that the Assembly can have all the powers to take decisions to cut charges, raise taxes and make the consequential financial changes as soon as it is back. As I have said repeatedly, we will not stand in its way.
	We are accountable for the good governance of Northern Ireland and we are accountable to this House and the other place. We cannot be obliged to follow the will of another body. We as a government could not come to your Lordships' House or the other place to ask those bodies, one elected, one appointed, to follow the will of another body that has no responsibility but some power that we have given it. That simply would not work.
	It is true that we need to take account of things. I do not want to goad people, but we are quite clear that there is a massive reform programme under way in Northern Ireland, much of it started by the Assembly when it was fully devolved. We did not initiate a lot of that; a lot of it was started by the Assembly.
	Processes are under way that have major financial consequences for the budget starting next year: the second year of this two-year budget. Water charging is one example. There is the new rating system—which I take the opportunity to say is not a test-bed experiment for England; it is suited to the 700,000 dwellings in Northern Ireland. That is what it has been carved out for. Taking any changes that the Assembly might want to make and any of the orders that may be required in the mean time could have massive financial complications for the budget—tens of millions of pounds—yet it would not have responsibility for taking the decisions to find the money.
	We must be serious about that. We are not standing in the way of the Assembly taking all the decisions. That is the point. We are not standing in its way. It can start this month or next month to take all the decisions. It is not fair or mature to put in its hands the power to take some decisions but not the consequential decisions. It would be quite impossible for me and other Ministers to come to this place to try to pick up the financial consequences of a situation that was not of our making and under no control. I am not saying that the Assembly would be irresponsible, but if we confer the power of veto on a body that does not have full responsibility for taking account of the consequences of its decisions, we are asking for trouble.
	We want to do what we can to listen to what the Assembly has to say. As I said at Second Reading on the point raised by the noble Baroness, Lady Park of Monmouth, on education, the order has been tabled. It will be debated: I think that it is programmed for later this month or very early next month. There will be a full debate on it. If we delay that order, that throws into considerable confusion part of the education system in Northern Ireland and puts it back for a year. It is not just a question of delaying it for a few months; we are talking about a year.
	We fully accept the points made by the noble Lord, Lord Tebbit. As I said, another Bill, the Northern Ireland (Miscellaneous Provisions) Bill, will come our way, on which we can have a full debate on the issues that would be devolved in future where the conditions are right. So there will be opportunities for this House to debate those matters in some detail.
	We want the Assembly to be back as quickly as possible. It can then pass the legislation that it wants and sort out the consequences of its decisions. That is very important. We want the Assembly to have mature, responsible elected representatives. They are more likely to be that way and restore the confidence of the people of Northern Ireland if they are seen to be accountable for their decisions as politicians. Those decisions might, on the one hand, be popular; but, on the other hand, they must take the consequential decisions that result in cuts or delays in programmes and face the electorate for that. They are then more likely to make good decisions.
	I am not saying that they should not make those decisions or change what the direct rule Ministers have done. I am not saying that at all. When the Assembly has its devolved powers back, it will be in charge of those matters. It can, using its own procedures and voting system, make those bold decisions, take charge of the implementation of the reform programme and speed it up, if it likes, or slow some of it down, but it will be responsible for all the decisions that flow from that.
	That is why we cannot agree to the power of veto. That is power without responsibility. We want the Assembly to be responsible and, as a responsible Government, we want to take account of what it says on the matters that we want it to discuss in the short period for which it will have temporary status. We will genuinely see how we can accommodate the views that come to us on a cross-party basis. We will do that in a spirit of using our best endeavours, but we cannot give the temporary Assembly veto powers, because it does not have responsibility for those actions. That must rest with Ministers accountable to this House and the other place.
	I have tried to respond in the least negative way that I can, but the answer is, "No, resist" for those reasons. I understand and sympathise with what is behind the amendment. The scrutiny system is unsatisfactory. If, as the noble Lord, Lord Tebbit, indicates, there is a failure—we are going for success—my view, and I think it is the view of other Ministers, is that if there is no return of the Assembly, there will have to be a different arrangement for direct rule for the foreseeable future from the one we have had hitherto. If it had been quite clear that the Assembly would not be back in a few months, we would have had to have that before November. There would have to be a completely different system.
	Departments were structured around Ministers—departments were designed for Ministers rather than Ministers designed for departments. We would have to change that system of having duplicate, sometimes overlapping responsibilities. For example, there were three departments dealing with education. There were 11 departments to suit the 11 Ministers. We would consider other changes in direct rule and then consider the consequences for the scrutiny in this place and the other place. So it would not be, "Carry on as she goes": the status quo of direct rule as in the past three years. I do not think that that would be a reasonable proposition. That is not said as a threat. It is not meant as bullying; that is just a practical consequence of ensuring that we have better government for Northern Ireland than we have been able to achieve with the scrutiny system that we have at present.

Lord Tebbit: I am grateful to the Minister for giving way. I find what he has said wholly persuasive.

Lord Rooker: I rest my case.

Baroness Harris of Richmond: First, I am very grateful for the support of Members of the Committee who have taken part in this mini-debate on the amendment. I am also very grateful to the Minister for his full and thoughtful response and his expression of sympathy—not seductiveness—for the intention behind the amendment. He made a very worthwhile and timely speech and I am most grateful for that. Of course, we are disappointed that the amendment will not be accepted. We intended to be careful and to have foresight, ensuring that all the possibilities were addressed. The money that the Minister said will accrue under our amendment may very well be as much as he says. We have not gone into great detail on that. However, I am very grateful once again to him for his very full response and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Schedule 1 agreed to.
	Schedules 2 and 3 agreed to.
	House resumed: Bill reported without amendment.

Electoral Administration Bill

Baroness Ashton of Upholland: My Lords, I beg to move that the House do now resolve itself into Committee (on Recommitment) on this Bill.

Moved accordingly, and, on Question, Motion agreed to.
	House in Committee (on Recommitment) accordingly.
	[The Deputy Speaker (Viscount Allenby of Megiddo) in the Chair.]

Viscount Allenby of Megiddo: I will first call the Minister to move Amendment No. 1. I will then call Amendments Nos. 2 to 17, which are amendments to Amendment No. 1. Proceedings on each amendment will be concluded before we move on to the next amendment. Amendments Nos. 2 to 17 having been dealt with, I will then put the Question on Amendment No. 1.

Lord Falconer of Thoroton: moved Amendment No. 1:
	After Clause 60, insert the following new clause—
	"REGULATION OF LOANS ETC
	(1) After Part 4 of the 2000 Act insert—
	"PART 4A
	REGULATION OF LOANS AND RELATED TRANSACTIONS
	71F REGULATED TRANSACTIONS
	(1) In this Part, a reference to a regulated transaction must be construed in accordance with this section.
	(2) An agreement between a registered party and another person by which the other person makes a loan of money to the party is a regulated transaction.
	(3) An agreement between a registered party and another person by which the other person provides a credit facility to the party is a regulated transaction.
	(4) Where—
	(a) a registered party and another person (A) enter into a regulated transaction of a description mentioned in subsection (2) or (3) or a transaction under which any property, services or facilities are provided for the use or benefit of the party (including the services of any person), and
	(b) A also enters into an arrangement whereby another person (B) gives any form of security (whether real or personal) for a sum owed to A by the party under the transaction mentioned in paragraph (a),
	the arrangement is a regulated transaction.
	(5) An agreement or arrangement is also a regulated transaction if—
	(a) the terms of the agreement or arrangement as first entered into do not constitute a regulated transaction by virtue of subsection (2), (3) or (4), but
	(b) the terms are subsequently varied in such a way that the agreement or arrangement becomes a regulated transaction.
	(6) References in subsections (2) and (3) to a registered party include references to an officer, member, trustee or agent of the party if he makes the agreement as such.
	(7) References in subsection (4) to a registered party include references to an officer, member, trustee or agent of the party if the property, services or facilities are provided to him, or the sum is owed by him, as such.
	(8) Except so far as the contrary intention appears, references to a registered party in the context of—
	(a) the making of a loan to a registered party,
	(b) the provision of a credit facility to a registered party, or
	(c) a sum being owed by a registered party,
	must, in the case of a party with accounting units, be construed as references to the central organisation of the party or any of its accounting units.
	(9) A reference to a connected transaction is a reference to the transaction mentioned in subsection (4)(b).
	(10) In this section a reference to anything being done by or in relation to a party or a person includes a reference to its being done directly or indirectly through a third person.
	(11) A credit facility is an agreement whereby a registered party is enabled to receive from time to time from another party to the agreement a loan of money not exceeding such amount (taking account of any repayments made by the registered party) as is specified in or determined in accordance with the agreement.
	(12) An agreement or arrangement is not a regulated transaction—
	(a) to the extent that in accordance with any enactment a payment made in pursuance of the agreement or arrangement falls to be included in a return as to election expenses in respect of a candidate or candidates at a particular election, or
	(b) if its value is not more than £200.
	(13) The Secretary of State may, by order, specify circumstances or any description of circumstances in which an agreement or arrangement falling within any of subsections (2) to (5) is not a regulated transaction.
	71G VALUATION OF REGULATED TRANSACTION
	(1) The value of a regulated transaction which is a loan is the value of the total amount to be lent under the loan agreement.
	(2) The value of a regulated transaction which is a credit facility is the maximum amount which may be borrowed under the agreement for the facility.
	(3) The value of a regulated transaction which is an arrangement by which any form of security is given is the contingent liability under the security provided.
	71H AUTHORISED PARTICIPANTS
	(1) A registered party must not—
	(a) be a party to a regulated transaction to which any of the other parties is not an authorised participant;
	(b) derive a benefit in consequence of a connected transaction if any of the parties to that transaction is not an authorised participant.
	(2) This section does not apply to a regulated transaction if it was entered into before the commencement of section (Regulation of loans etc) of the Electoral Administration Act 2006.
	(3) In this Part, an authorised participant is a person who is a permissible donor within the meaning of section 54(2).
	(4) The Secretary of State may, by order, specify circumstances or any description of circumstances in which a person who is not a permissible donor is to be treated as an authorised participant.
	71I REGULATED TRANSACTION INVOLVING UNAUTHORISED PARTICIPANT
	(1) This section applies if a registered party is a party to a regulated transaction in which another participant is not an authorised participant.
	(2) The transaction is void.
	(3) Despite subsection (2)—
	(a) any money received by the registered party by virtue of the transaction must be repaid by the treasurer of the party to the person from whom it was received, along with interest at such rate as is determined in accordance with an order made by the Secretary of State;
	(b) that person is entitled to recover the money, along with such interest.
	(4) If—
	(a) the money is not (for whatever reason) repaid as mentioned in subsection (3)(a), or
	(b) the person entitled to recover the money refuses or fails to do so,
	the Commission may apply to the court to make such order as it thinks fit to restore (so far as is possible) the parties to the transaction to the position they would have been in if the transaction had not been entered into.
	(5) An order under subsection (4) may in particular—
	(a) where the transaction is a loan or credit facility, require that any amount owed by the registered party be repaid (and that no further sums be advanced under it);
	(b) where any form of security is given for a sum owed under the transaction, require that security to be discharged.
	(6) In the case of a regulated transaction where a party other than a registered party—
	(a) at the time the registered party enters into the transaction, is an authorised participant, but
	(b) subsequently, for whatever reason, ceases to be an authorised participant,
	the transaction is void and subsections (3) to (5) apply with effect from the time when the other party ceased to be an authorised participant.
	(7) This section does not apply to a regulated transaction if it was entered into before the commencement of section (Regulation of loans etc) of the Electoral Administration Act 2006.
	71J GUARANTEES AND SECURITIES: UNAUTHORISED PARTICIPANTS
	(1) This section applies if—
	(a) a registered party and another person (A) enter into a transaction of a description mentioned in section 71F(4)(a),
	(b) A is party to a regulated transaction of a description mentioned in section 71F(4)(b) ("the connected transaction") with another person (B), and
	(c) B is not an authorised participant.
	(2) Section 71I(2) to (5) applies to the transaction mentioned in subsection (1)(a).
	(3) The connected transaction is void.
	(4) Subsection (5) applies if (but only if) A is unable to recover from the party the whole of the money mentioned in section 71I(3)(a) (as applied by subsection (2) above), along with such interest as is there mentioned.
	(5) Despite subsection (3), A is entitled to recover from B any part of that money (and such interest) that is not recovered from the party.
	(6) Subsection (5) does not entitle A to recover more than the contingent liability under the security provided by virtue of the connected transaction.
	(7) In the case of a connected transaction where B—
	(a) at the time A enters into the transaction, is an authorised participant, but
	(b) subsequently, for whatever reason, ceases to be an authorised participant,
	subsections (2) to (6) apply with effect from the time when B ceased to be an authorised participant.
	(8) This section does not apply to a regulated transaction if it was entered into before the commencement of section (Regulation of loans etc) of the Electoral Administration Act 2006.
	(9) If the transaction mentioned in section 71F(4)(a) is not a regulated transaction of a description mentioned in section 71F(2) or (3), references in this section and section 71I(2) to (5) (as applied by subsection (2) above) to the repayment or recovery of money must be construed as references to (as the case may be)—
	(a) the return or recovery of any property provided under the transaction,
	(b) to the extent that such property is incapable of being returned or recovered or its market value has diminished since the time the transaction was entered into, the repayment or recovery of the market value at that time, or
	(c) the market value (at that time) of any facilities or services provided under the transaction.
	71K TRANSFER TO UNAUTHORISED PARTICIPANT INVALID
	If an authorised participant purports to transfer his interest in a regulated transaction to a person who is not an authorised participant the purported transfer is of no effect.
	71L OFFENCES RELATING TO REGULATED TRANSACTIONS
	(1) A registered party commits an offence if—
	(a) it enters into a regulated transaction of a description mentioned in section 71F(2) or (3) in which another participant is not an authorised participant, and
	(b) an officer of the party knew or ought reasonably to have known of the matters mentioned in paragraph (a).
	(2) A person commits an offence if—
	(a) he is the treasurer of a registered party,
	(b) the party enters into a regulated transaction of a description mentioned in section 71F(2) or (3) in which another participant is not an authorised participant, and
	(c) he knew or ought reasonably to have known of the matters mentioned in paragraph (b).
	(3) A registered party commits an offence if—
	(a) it enters into a regulated transaction of a description mentioned in section 71F(2) or (3) in which another participant is not an authorised participant,
	(b) no officer of the party knew or ought reasonably to have known that the other participant is not an authorised participant, and
	(c) as soon as practicable after knowledge of the matters mentioned in paragraph (a) comes to the treasurer of the party he fails to take all reasonable steps to repay any money which the party has received by virtue of the transaction.
	(4) A person who is the treasurer of a registered party commits an offence if—
	(a) the party enters into a regulated transaction of a description mentioned in section 71F(2) or (3) in which another participant is not an authorised participant,
	(b) subsection (2)(c) does not apply to him, and
	(c) as soon as practicable after knowledge of the matters mentioned in paragraph (a) comes to him he fails to take all reasonable steps to repay any money which the party has received by virtue of the transaction.
	(5) A registered party commits an offence if—
	(a) it benefits from or falls to benefit in consequence of a connected transaction to which any of the parties is not an authorised participant, and
	(b) an officer of the party knew or ought reasonably to have known of the matters mentioned in paragraph (a).
	(6) A person commits an offence if—
	(a) he is the treasurer of a registered party,
	(b) the party benefits from or falls to benefit in consequence of a connected transaction to which any of the parties is not an authorised participant, and
	(c) he knew or ought reasonably to have known of the matters mentioned in paragraph (b).
	(7) A registered party commits an offence if—
	(a) it is a party to a transaction of a description mentioned in section 71F(4)(a),
	(b) it benefits from or falls to benefit in consequence of a connected transaction to which any of the parties is not an authorised participant,
	(c) no officer of the party knew or ought reasonably to have known of the matters mentioned in paragraphs (a) and (b), and
	(d) as soon as practicable after knowledge of the matters mentioned in paragraphs (a) and (b) comes to the treasurer of the party he fails to take all reasonable steps to pay to any person who has provided the party with any benefit in consequence of the connected transaction the value of the benefit.
	(8) A person who is the treasurer of a registered party commits an offence if—
	(a) the party is a party to a transaction of a description mentioned in section 71F(4)(a),
	(b) the party benefits from or falls to benefit in consequence of a connected transaction to which any of the parties is not an authorised participant,
	(c) subsection (6)(c) does not apply to him, and
	(d) as soon as practicable after knowledge of the matters mentioned in paragraphs (a) and (b) comes to him he fails to take all reasonable steps to pay to any person who has provided the party with any benefit in consequence of the connected transaction the value of the benefit.
	(9) A person commits an offence if he—
	(a) knowingly enters into, or
	(b) knowingly does any act in furtherance of,
	any arrangement which facilitates or is likely to facilitate, whether by means of concealment or disguise or otherwise, the participation by a registered party in a regulated transaction with a person other than an authorised participant.
	(10) It is a defence for a person charged with an offence under subsection (2) to prove that he took all reasonable steps to prevent the registered party entering the transaction.
	(11) It is a defence for a person charged with an offence under subsection (6) to prove that he took all reasonable steps to prevent the registered party benefiting in consequence of the connected transaction.
	(12) A reference to a registered party entering into a regulated transaction includes a reference to any circumstances in which the terms of a regulated transaction are varied so as to increase the amount of money to which the party is entitled in consequence of the transaction.
	(13) A reference to a registered party entering into a transaction in which another participant is not an authorised participant includes a reference to any circumstances in which another party to the transaction who is an authorised participant ceases (for whatever reason) to be an authorised participant.
	71M QUARTERLY REPORTS OF REGULATED TRANSACTIONS
	(1) The treasurer of a registered party must, in the case of each year, prepare a report under this subsection in respect of each of the following periods—
	(a) January to March;
	(b) April to June;
	(c) July to September;
	(d) October to December.
	(2) The reports prepared under subsection (1) for any year must, in the case of each authorised participant who enters into or is party to a regulated transaction with the party in that year, comply with—
	(a) the following provisions of this section so far as they require any such transaction to be recorded in such a report;
	(b) section 71N so far as it requires any changes in relation to any such transaction to be so recorded.
	(3) In this section—
	"transaction report" means a report prepared under subsection (1);
	"reporting period", in relation to such a report, means the period mentioned in any of paragraphs (a) to (d) of that subsection to which the report relates;
	"relevant transaction", in relation an authorised participant and a year, means a regulated transaction entered into by the participant and the registered party in that year.
	(4) Where no previous relevant transaction or transactions has or have been required to be recorded under this subsection, a relevant transaction must be recorded—
	(a) if the value of the transaction is more than £5,000, or
	(b) if the aggregate amount of it and any other relevant transaction or transactions is more than £5,000.
	(5) A transaction to which subsection (4) applies must—
	(a) if it falls within paragraph (a) of that subsection, be recorded in the transaction report for the reporting period in which the transaction is entered into, or
	(b) if it falls within paragraph (b) of that subsection, be recorded (as part of the aggregate amount mentioned in that paragraph) in the transaction report for the reporting period in which the transaction which causes that aggregate to be more than £5,000 is entered into.
	(6) Where any previous relevant transaction or transactions has or have been required to be recorded under subsection (4), a relevant transaction must be recorded at the point when any relevant transaction or transactions of an amount or aggregate amount which is more than £1,000 has or have been entered into—
	(a) since the transaction or transactions required to be recorded under subsection (4), or
	(b) if any relevant transaction or transactions has or have previously been required to be recorded under this subsection, since the transaction or transactions last required to be so recorded.
	(7) A transaction to which subsection (6) applies on any occasion must—
	(a) if it is the only transaction required to be recorded on that occasion, be recorded in the transaction report for the reporting period in which it is entered into, or
	(b) in any other case be recorded (as part of the aggregate amount mentioned in that subsection) in the transaction report for the reporting period in which the transaction causes that aggregate amount to be more than £1,000 is entered into.
	(8) A transaction report must also record any regulated transaction which is entered into by the party and a person who is not an authorised participant and is dealt with in accordance with section 71I or 71J.
	(9) If during any reporting period no transactions have been entered into by the party which, by virtue of the preceding provisions of this section, are required to be recorded in the transaction report for that period, the report must contain a statement to that effect.
	(10) Where a registered party is a party with accounting units, subsections (2) to (9) apply separately in relation to the central organisation of the party and each of its accounting units—
	(a) as if any reference to the party were a reference to the central organisation or (as the case may be) to such an accounting unit; but
	(b) with the substitution, in relation to such an accounting unit, of "£1,000" for "£5,000" in each place where it occurs in subsections (4) and (5).
	(11) However, for the purposes of subsections (2) to (8) in their application to the central organisation and any year by virtue of subsection (10), any transaction—
	(a) which is entered into by an authorised participant and any of the accounting units during that year, but
	(b) which is not required to be recorded under subsection (4) or (6) (as they apply by virtue of subsection (10)) as a transaction entered into by the accounting unit,
	must be treated as a transaction entered into by the authorised participant and the central organisation.
	(12) Schedule 6A has effect with respect to the information to be given in transaction reports.
	71N CHANGES TO BE RECORDED IN QUARTERLY REPORTS
	(1) If during any reporting period, in the case of any recorded transaction—
	(a) another authorised participant becomes party to the transaction (whether in place of or in addition to any existing participant),
	(b) there is any change in the details given in relation to the transaction in pursuance of paragraph 5, 6 or 7 of Schedule 6A, or
	(c) the transaction comes to an end,
	the change must be recorded in the transaction report for that period.
	(2) For the purposes of subsection (1)(c), a loan comes to an end if—
	(a) the whole debt (or all the remaining debt) is repaid;
	(b) the creditor releases the whole debt (or all the remaining debt);
	and in such a case the transaction report must state how the loan has come to an end.
	(3) A transaction report must also record any change by which a person who is not an authorised participant becomes party to the transaction (whether in place of or in addition to any existing participant) and in consequence of which the transaction is dealt with in accordance with section 71I or 71J.
	(4) If during any reporting period there have been no changes (as mentioned in subsection (1) or (3)) to any recorded transaction, the report must contain a statement to that effect.
	(5) A recorded transaction, in relation to a reporting period, is a regulated transaction which is or has been recorded in a transaction report for that or a previous reporting period.
	(6) Where a registered party is a party with accounting units, subsections (1) to (5) apply separately in relation to the central organisation of the party and each of its accounting units; and the reference in subsection (5) to a transaction report for a previous reporting period is a reference to a report prepared in relation the central organisation or accounting unit, as the case may be.
	(7) In this section, "reporting period" and "transaction report" have the meanings given in section 71M.
	71O EXISTING TRANSACTIONS
	(1) This section applies in relation to the first report prepared under section 71M(1) by the treasurer of a party which, at the date on which that section comes into force, is a registered party.
	(2) Sections 71M and 71N have effect, in the case of a person (whether or not an authorised participant) who is a party to an existing transaction, as if—
	(a) that transaction had been entered into in the reporting period to which the report relates;
	(b) any change (as mentioned in section 71N(1) or (3)) to the transaction had occurred during that period.
	(3) An existing transaction is a regulated transaction which, at the date on which section 71M comes into force, has not come to an end for the purposes of section 71N(1)(c).
	71P EXEMPTION FROM REQUIREMENT TO PREPARE QUARTERLY REPORTS
	(1) This section applies if each of four consecutive transaction reports prepared by the treasurer of a registered party in pursuance of subsection (1) of section 71M contains—
	(a) in the case of a party without accounting units, a statement under subsection (9) of that section and a statement under subsection (4) of section 71N, or
	(b) in the case of a party with accounting units, statements under each of those subsections in relation to the central organisation of the party and each of its accounting units.
	(2) The treasurer is not required to prepare any further transaction reports in pursuance of subsection (1) of section 71M until—
	(a) a recordable transaction is entered into by the registered party, or
	(b) a recordable change is made to a recorded transaction.
	(3) A recordable transaction is a transaction which is required to be recorded by virtue of any of subsections (4) to (8) of section 71M (including those subsections as applied by subsection (10) of that section).
	(4) A recordable change is a change which is required to be recorded by virtue of subsection (1) of section 71N (including that subsection as applied by subsection (6) of that section).
	(5) If a recordable transaction is entered into or a recordable change is made, nothing in this section affects the operation of section 71M or 71N in relation to—
	(a) the reporting period in which the recordable transaction is entered into or the recordable change is made, or
	(b) any subsequent reporting period which falls before the time (if any) when this section again applies in relation to the party.
	(6) In this section—
	"transaction report" and "reporting period" have the same meaning as in section 71M;
	"recorded transaction" has the same meaning as in section 71N.
	71Q WEEKLY TRANSACTION REPORTS DURING GENERAL ELECTION PERIODS
	(1) Subject to section 71R, the treasurer of a registered party must, in the case of any general election period, prepare a report under this subsection in respect of each of the following periods—
	(a) the period of seven days beginning with the first day of the general election period,
	(b) each succeeding period of seven days falling within the general election period, and
	(c) any final period of less than seven days falling within that period.
	(2) In this section—
	"weekly report" means a report prepared under subsection (1);
	"reporting period", in relation to such a report, means the period mentioned in any of paragraphs (a) to (c) of that subsection to which the report relates.
	(3) The weekly report for any reporting period must record each regulated transaction which has a value of more than £5,000 entered into during that period—
	(a) by the party (if it is not a party with accounting units), or
	(b) by the central organisation of the party (if it is a party with accounting units).
	(4) If during any reporting period no transactions falling within subsection (3) have been entered into as mentioned in that subsection, the weekly report for that period must contain a statement to that effect.
	(5) Schedule 6A has effect with respect to the information to be given in weekly reports.
	(6) The weekly report for any reporting period must also record any change (as mentioned in section 71N(1) or (3)) during that period to a regulated transaction recorded—
	(a) by the party (if it is not a party with accounting units), or
	(b) by the central organisation of the party (if it is a party with accounting units).
	(7) For the purposes of subsection (6), a transaction is recorded by a party or the central organisation of a party if it is or has been recorded in—
	(a) a transaction report prepared under section 71M(1), or
	(b) a weekly report prepared for that or a previous reporting period falling within the general election period.
	(8) If during any reporting period there have been no changes falling within subsection (6), the weekly report for that period must contain a statement to that effect.
	(9) In this section and section 71R "general election period" has the meaning given in section 63.
	71R EXEMPTIONS FROM SECTION 71Q
	(1) Section 71Q(1) does not apply in relation to a registered party in respect of a general election period if the party has made an exemption declaration under section 64 which covers the general election in question.
	(2) In its application (in accordance with subsection (1)) in relation to section 71Q, section 64 is to be read subject to the following modifications—
	(a) the reference in subsection (5) to section 63 is to be read as a reference to section 71Q;
	(b) subsection (6) is omitted.
	71S SUBMISSION OF TRANSACTION REPORTS TO COMMISSION
	(1) A transaction report under section 71M must be delivered to the Commission by the treasurer of the party in question within the period of 30 days beginning with the end of the reporting period to which it relates.
	(2) A transaction report under section 71Q must be delivered to the Commission by the treasurer of the party in question—
	(a) within the period of 7 days beginning with the end of the reporting period to which it relates, or
	(b) if that is not possible in the case of any party to which section 71Q applies by virtue of section 64(5) (as applied by section 71R), within the period of 7 days beginning with the first day on which the party has a candidate at the election in question.
	(3) If a transaction report under section 71M or 71Q states that the registered party has seen evidence of such description as is prescribed by the Secretary of State in regulations that an individual participant has an anonymous entry in the electoral register (within the meaning of the Representation of the People Act 1983), the report must be accompanied by a copy of the evidence.
	(4) The treasurer of a registered party commits an offence if he fails to comply with the requirements of subsection (1) or (2) in relation to a transaction report.
	(5) The treasurer of a registered party also commits an offence if he delivers a transaction report to the Commission which does not comply with any requirements of this Part as regards the recording of transactions, or changes to transactions, in such a report.
	(6) Where a person is charged with an offence under this section, it shall be a defence to prove that he took all reasonable steps, and exercised all due diligence, to ensure that any such requirements were complied with in relation to transactions entered into by the party, or changes to transactions made, during the relevant reporting period.
	(7) Where the court is satisfied, on an application made by the Commission, that any failure to comply with any such requirements in relation to—
	(a) any transaction entered into by a registered party, or
	(b) any change made to a transaction to which the registered party is a party,
	was attributable to an intention on the part of any person to conceal the existence or true value of the transaction, the court may make such order as it thinks fit to restore (so far as is possible) the parties to the transaction to the position they would have been in if the transaction had not been entered into.
	(8) An order under subsection (7) may in particular—
	(a) where the transaction is a loan or credit facility, require that any amount owed by the registered party be repaid (and that no further sums be advanced under it);
	(b) where any form of security is given for a sum owed under the transaction, or the transaction is an arrangement by which any form of security is given, require that the security be discharged.
	(9) The reference in subsection (2) to a party having a candidate at an election must be construed in accordance with section 64(9).
	71T DECLARATION BY TREASURER IN TRANSACTION REPORT
	(1) Each transaction report under section 71M or 71Q must, when delivered to the Commission, be accompanied by a declaration made by the treasurer which complies with subsection (2), (3) or (4).
	(2) In the case of a report under section 71M (other than one making a nil return), the declaration must state that, to the best of the treasurer's knowledge and belief—
	(a) all the transactions recorded in the report were entered into by the party with authorised participants,
	(b) during the reporting period no transaction has been entered into by the party which is required to be recorded in the report but is not so recorded,
	(c) during the reporting period no change has been made to a regulated transaction which is required to be recorded in the report but is not so recorded, and
	(d) during the reporting period the party has not entered into any regulated transaction with a person or body other than an authorised participant.
	(3) For the purposes of subsection (2) a return under section 71M makes a nil return if it contains such a statement as is mentioned in subsection (9) of that section and a statement as is mentioned in subsection (4) of section 71N; and in the case of such a report the declaration must state that, to the best of the treasurer's knowledge and belief—
	(a) those statements are accurate, and
	(b) during the reporting period the party has not entered into any regulated transaction with a person or body other than an authorised participant.
	(4) In the case of a report under section 71Q, the declaration must state that, to the best of the treasurer's knowledge and belief—
	(a) no transaction has been entered into by the party, or (if section 71Q(3)(b) applies) by its central organisation, during the reporting period which is required to be recorded in the report but is not so recorded, and
	(b) no change has been made to a regulated transaction during the reporting period which is required to be recorded in the report but is not so recorded.
	(5) A person commits an offence if he knowingly or recklessly makes a false declaration under this section.
	71U WEEKLY DONATION REPORTS IN CONNECTION WITH ELECTIONS OTHER THAN GENERAL ELECTIONS
	(1) The Secretary of State may, after consulting the Commission and all registered parties, by order make provision for—
	(a) sections 71Q and 71R, together with Schedule 6A,
	(b) sections 71S and 71T, and
	(c) section 147 so far as applying in relation to section 71S(1) or (2),
	to apply in relation to the specified election period in the case of one or more relevant elections with such modifications as are specified in the order.
	(2) In this section "specified election period" and "relevant election" have the meanings given in section 67.
	71V REGISTER OF RECORDABLE TRANSACTIONS
	(1) The Commission must maintain a register of all transactions (and all changes) reported to them under this Part.
	(2) The register must be maintained by the Commission in such form as they may determine and must contain the following details in the case of each such transaction—
	(a) the value of the transaction;
	(b) (subject to subsection (3)) such other details as have been given in relation to the transaction in pursuance of any of paragraphs 2 to 7 of Schedule 6A;
	(c) the relevant date for the transaction within the meaning of paragraph 8 of that Schedule.
	(3) The details required by virtue of subsection (2) do not include, in the case of any transaction entered into by an authorised participant who is an individual, the individual's address.
	(4) Where—
	(a) any transaction or transactions is or are reported to the Commission under this Part, or
	(b) any change or changes is or are so reported to them,
	they must cause the details mentioned in subsection (2) to be entered or, as the case may be, changed in the register in respect of the transaction or transactions as soon as is reasonably practicable.
	71W PROCEEDINGS UNDER SECTIONS 71I AND 71S
	(1) This section has effect in relation to proceedings on applications under sections 71I(4) and 71S(7).
	(2) The court is—
	(a) in England and Wales, the county court;
	(b) in Scotland, the sheriff, and the proceedings are civil proceedings.
	(3) The standard of proof is that applicable to civil proceedings.
	(4) An order may be made whether or not proceedings are brought against any person for an offence under section 71L, 71S or 71T.
	(5) An appeal against an order made by the sheriff may be made to the Court of Session.
	(6) Rules of court may make provision—
	(a) with respect to applications or appeals from proceedings on such applications;
	(b) for the giving of notice of such applications or appeals to persons affected;
	(c) for the joinder, or in Scotland sisting, of such persons as parties;
	(d) generally with respect to procedure in such applications or appeals.
	(7) Subsection (6) does not affect any existing power to make rules.
	71X CONSTRUCTION OF PART 4A
	(1) In this Part—
	"authorised participant" must be construed in accordance with section 71H;
	"connected transaction" has the meaning given by section 71F(9);
	"credit facility" has the meaning given by section 71F(11);
	"regulated transaction" must be construed in accordance with section 71F.
	(2) For the purposes of any provision relating to the reporting of transactions, anything required to be done by a registered party in consequence of its being a party to a regulated transaction must also be done by it, if it is a party to a transaction of a description mentioned in section 71F(4)(a), as if it were a party to the connected transaction."
	(2) In section 147 of that Act (civil penalty for failure to deliver documents etc), after subsection (1)(c) insert—
	"(ca) the requirements of section 71S(1) or (2) are not complied with in relation to any transaction report relating to a registered party;".
	(3) In section 149 of that Act (inspection of Commission's registers etc), after subsection (1)(b) insert—
	"(ba) section 71V;".
	(4) In section 156(4) of that Act (provision about subordinate legislation)—
	(a) after paragraph (d) insert—
	"(da) section 71F(13),
	(db) section 71H(4),";
	(b) after paragraph (h) insert—
	"(ha) paragraph 9 of Schedule 6A,".
	(5) After Schedule 6 to that Act (details to be given in donation reports) insert—
	"SCHEDULE 6A
	DETAILS TO BE GIVEN IN TRANSACTION REPORTS
	:TITLE3:Preliminary
	1 (1) In this Schedule—
	(a) "quarterly report" means a report required to be prepared by virtue of section 71M;
	(b) "weekly report" means a report required to be prepared by virtue of section 71Q;
	and "recordable transaction", in relation to a quarterly or weekly report, means a transaction required to be recorded in that report.
	(2) References in this Schedule to a registered party must, in the case of a party with accounting units, be read as references to the central organisation of the party.
	:TITLE3:Identity of authorised participants: quarterly reports
	2 (1) In relation to each recordable transaction, a quarterly report must give the following information about each authorised participant (other than the registered party deriving the benefit of the transaction) that is required by any of sub-paragraphs (2) to (10).
	(2) In the case of an individual the report must give his full name and—
	(a) if his address is, at the date the transaction is entered into, shown in an electoral register (within the meaning of section 54), that address, and
	(b) otherwise, his home address (whether in the United Kingdom or elsewhere).
	(3) Sub-paragraph (2) applies in the case of an individual who has an anonymous entry in an electoral register (within the meaning of the Representation of the People Act 1983) as if for paragraphs (a) and (b) there were substituted "state that the registered party has seen evidence of such description as is prescribed by the Secretary of State in regulations that the individual has an anonymous entry in an electoral register (within the meaning of the Representation of the People Act 1983)".
	(4) In the case of a company falling within section 54(2)(b) the report must give—
	(a) the company's registered name,
	(b) the address of its registered office, and
	(c) the number with which it is registered.
	(5) In the case of a registered party the report must give—
	(a) the party's registered name, and
	(b) the address of its registered headquarters.
	(6) In the case of trade union falling within section 54(2)(d) the report must give—
	(a) the name of the union, and
	(b) the address of its head or main office,
	as shown in the list kept under the Trade Union and Labour Relations (Consolidation) Act 1992 or the Industrial Relations (Northern Ireland) Order 1992.
	(7) In the case of a building society within the meaning of the Building Societies Act 1986 the report must give—
	(a) the name of the society, and
	(b) the address of its principal office.
	(8) In the case of a limited liability partnership falling within section 54(2)(f) the report must give—
	(a) the partnership's registered name, and
	(b) the address of its registered office.
	(9) In the case of a friendly or other registered society falling within section 54(2)(g) the report must give—
	(a) the name of the society, and
	(b) the address of its registered office.
	(10) In the case of an unincorporated association falling within section 54(2)(h) the report must give—
	(a) the name of the association, and
	(b) the address of its main office in the United Kingdom.
	:TITLE3:Identity of authorised participants: weekly reports
	3 (1) In relation to each recordable transaction, a weekly report must give all such details of the name and address of each authorised participant (other than the registered party deriving the benefit from the transaction) as are for the time being known to the party.
	(2) In the case of a participant who is an individual having an anonymous entry in an electoral register (within the meaning of the Representation of the People Act 1983) instead of giving details of the address of the individual the party must state that it has seen evidence of such description as is prescribed by the Secretary of State in regulations that the individual has such an entry.
	:TITLE3:Identity of unauthorised participants
	4 In relation to each recordable transaction to which a person who is not an authorised participant is a party, a quarterly or weekly report must give the name and address of the person.
	:TITLE3:Details of transaction
	5 (1) In relation to each recordable transaction a report must give the following details about the transaction.
	(2) A quarterly or weekly report must give the nature of the transaction (that is to say, whether it is a loan, a credit facility or an arrangement by which any form of security is given).
	(3) A quarterly or weekly report must give the value of the transaction (determined in accordance with section 71G) or, in the case of a credit facility or security to which no limit is specified, a statement to that effect.
	(4) A quarterly or weekly report must give the relevant date for the transaction (determined in accordance with paragraph 8).
	(5) A quarterly report must—
	(a) state whether the transaction was entered into by the registered party or any accounting unit of the party, or
	(b) in the case of a transaction to which section 71M(11) applies, indicate that it is a transaction which falls to be treated as made to the party by virtue of that provision.
	6 (1) In relation to each recordable transaction of a description mentioned in section 71F(2) or (3), a quarterly or weekly report must give the following details about the transaction.
	(2) The report must give—
	(a) the date when the loan is to be repaid or the facility is to end (or a statement that the loan or facility is indefinite), or
	(b) where that date is to be determined under the agreement, a statement of how it is to be so determined.
	(3) The report must give—
	(a) the rate of interest payable on the loan or on sums advanced under the facility (or a statement that no interest is payable), or
	(b) where that rate is to be determined under the agreement, a statement of how it is to be so determined.
	(4) The report must state whether any form of security is given in respect of the loan or the sums advanced under the facility.
	7 (1) In relation to each recordable transaction of a description mentioned in section 71F(4)(b), a quarterly or weekly report must give the following details about the transaction.
	(2) The report must—
	(a) if the transaction mentioned in section 71F(4)(a) is a regulated transaction, identify that transaction by reference to the transaction report in which it is recorded;
	(b) in any other case, give a description of the principal features of that transaction.
	(3) Where the security given consists in or includes rights over any property, the report must state the nature of that property.
	(4) The report must—
	(a) if the person giving the security receives from the registered party any consideration for giving the security, give a statement of that consideration;
	(b) in any other case, state that no such consideration is received.
	8 (1) For the purposes of paragraph 5(4) as it applies to a quarterly report, the relevant date for a transaction is—
	(a) if the transaction is within section 71M(4)(a) or (7)(a), the date when the transaction was entered into by the party or the accounting unit;
	(b) if the transaction is within section 71M(4)(b) or (7)(b), the date when the party or the accounting unit entered into the transaction which caused the aggregate amount in question to be more than the limit specified in that provision.
	(2) For the purposes of paragraph 5(4) as it applies to a weekly report, the relevant date for a transaction is the date when the transaction was entered into by the party or its central organisation as mentioned in section 71Q(3).
	:TITLE3:Other details
	9 (1) The Secretary of State may by order amend paragraphs 2 to 7 so as to vary the details which a quarterly or weekly report must give about a transaction.
	(2) The Secretary of State must not make an order under sub-paragraph (1) unless he first consults the Commission."
	(6) In Schedule 20 to that Act (penalties), after the entry relating to section 71E(5) (as inserted by paragraph 2 of Schedule 1 to the Northern Ireland (Miscellaneous Provisions) Act 2006) insert—
	
		
			  
			 "Section 71L(1) (registered party entering into regulated transaction with unauthorised participant) On summary conviction: statutory maximumOn indictment: fine 
			 "Section 71L(2) (treasurer of party entering into regulated transaction with unauthorised participant) On summary conviction: statutory maximum or 12 months 
			  On indictment: fine or 1 year 
			 Section 71L(3) (party liable if treasurer fails to repay money obtained under regulated transaction with unauthorised participant) On summary conviction: statutory maximum 
			  On indictment: fine 
			 Section 71L(4) (treasurer failing to repay money obtained under regulated transaction with unauthorised participant) On summary conviction: statutory maximum or 12 months 
			  On indictment: fine or 1 year 
			 Section 71L(5) (party benefiting from connected transaction to which an unauthorised participant is a party) On summary conviction: statutory maximum 
			  On indictment: fine 
			 Section 71L(6) (treasurer of registered party which benefits from connected transaction to which an unauthorised participant is a party) On summary conviction: statutory maximum or 12 months 
			  On indictment: fine or 1 year 
			 Section 71L(7) (party liable if treasurer fails to repay benefit obtained in consequence of security given by unauthorised participant) On summary conviction: statutory maximum 
			  On indictment: fine 
			 Section 71L(8) (treasurer failing to repay benefit obtained in consequence of security given by unauthorised participant) On summary conviction: statutory maximum or 12 months 
			  On indictment: fine or 1 year 
			 Section 71L(9) (facilitating a regulated transaction involving unauthorised participant) On summary conviction: statutory maximum or 12 months 
			  On indictment: fine or 1 year 
			 Section 71S(4) (failure to deliver transaction reports to Commission within time limits) On summary conviction: Level 5 Section 71S(5) (failure to comply with requirements for recording transactions in transaction report) On summary conviction: statutory maximum or 12 months 
			  On indictment: fine or 1 year 
			 Section 71T(5) (making a false declaration about transaction report) On summary conviction: statutory maximum or 12 months 
			  On indictment: fine or 1 year"."

Lord Falconer of Thoroton: I move Amendment No. 1 on behalf of the noble Baroness, Lady Ashton of Upholland, and, with the leave of the Committee, I will speak also to the other amendments in the group.
	The amendments fulfil the commitment I gave to the House on 20 March this year that I would table amendments that deal with loans that political parties receive. There are issues related to the funding of political parties that go beyond the treatment of loans, and the review set up by my right honourable friend the Prime Minister and chaired by Sir Hayden Phillips will deal with these. We are tabling these amendments now because there is broad agreement between the political parties and the Electoral Commission as to what should be done. The legislative vehicle, the Electoral Administration Bill, which falls within my responsibilities, gives us the opportunity to make the necessary changes. Moreover, amendments that deal with these issues had already been tabled for discussion in Grand Committee.
	Noble Lords will be aware of the degree of public concern about this issue. The Government have already made a huge contribution to introducing transparency into the affairs of political parties by advancing in 2000 a new regime for the disclosure of donations. Loans on commercial terms were not included. The regime was advanced on the recommendation of the Committee on Standards in Public Life, on which the noble Lord, Lord Goodhart, served. I see he is in his place today. The Government commissioned it to consider the whole issue of the funding of political parties. At that time, loans were not thought to pose any problems. The amendments we now propose take the form of a new Part 4A of, and Schedule 6A to, the Political Parties, Elections and Referendums Act 2000, to which I shall refer from now on as the 2000 Act. As I am sure noble Lords will know, the existing Part 4 of, and Schedule 6 to, the 2000 Act provide a system for the regulation of donations to political parties. That regime requires all donations over £5,000 to a political party to be reported to the Electoral Commission, and ensures that donations can be made only by individuals or organisations with a sufficient connection to the United Kingdom.
	These requirements have been widely acknowledged to have brought transparency and openness to the making of donations to parties. That is why we have chosen the same regime as a template for the current amendments dealing with loans. Indeed, the new provisions deviate from the requirements for donations only where it has been necessary to reflect the different nature of a loan from a donation. I am sure that noble Lords will agree that it makes sense to build on the success of the existing donations regime in trying to achieve the same level of openness in loans to parties.
	Before I come to the more detailed aspects of the regime as set out in the new sections and schedule, I think it would be useful to remind the Committee of the four main features proposed. First, the reporting requirement is triggered when a loan of over £5,000 is made. Such loans, whether made on commercial or less than commercial terms, will have to be reported to the Electoral Commission. This will be at quarterly intervals, or weekly during a general election period. Secondly, all loans extant on the day that the new provisions come into force, and any taken out thereafter, would have to be disclosed. Thirdly, a party would be permitted to take out a loan only from the same sources from which it is permitted to receive donations, although existing loans will not be subject to that permissibility requirement. Fourthly, the regime would cover not only loans, but all credit facilities and the provision by third parties of guarantees and securities.
	As our thoughts have developed on how best to provide reassurance that the funding of political parties will in future be a matter of record, I have looked to representatives of other main parties for support, which I have received. On 20 March, I wrote to all the parties represented at Westminster, and have since held meetings with many of those. Each of them shares my concern that the Government should act quickly, and recognises that a scheme similar to that now well established for donations would be a proportionate response to the need for transparency. I have also taken the views of Sam Younger, chairman of the Electoral Commission, who has welcomed the proposals, and I have spoken to the British Bankers' Association in so far as issues arise about credit and loans from banks.
	I now turn to the detail of the new clause. I am sure that noble Lords will recognise much of this from the donations regime in Part 4 of, and Schedule 6 to, the 2000 Act. First, let us look at the scope of the regime. In all the debate and discussion of the past few weeks, the focus has been on straightforward loans to political parties. However, as we are all aware, there are other ways of giving a financial benefit to a party, apart from giving cash loans or a simple cash donation. There is the giving of credit or the provision of a guarantee or some form of security so that a party can benefit from a loan or some form of property, services or facilities that would otherwise be beyond its credit rating.
	It is important to note what the new regime we propose is and is not intended to do. We do not see a need to create a regime that governs all the significant commercial transactions of a political party, including ordinary contracts for the supply of goods, services and facilities. Money is unique, as a gift or loan of money provides a political party with the flexibility to acquire whatever it may need at a particular time. However, it would not be appropriate for the regime to be confined to simple cash loans. Rather, we also need to include credit facilities, such as overdrafts. Equally, the giving of guarantees and securities by third parties can confer the same flexibility as a loan of money. Accordingly, the new regime governs this situation as well. Otherwise, a wealthy backer could offer guarantees to all a party's commercial suppliers and enable the party to obtain anything it might need at any given time, even though its credit rating would not normally allow it to do so.
	The definition of "regulated transaction" used in proposed new Section 71F of the amendment therefore captures more than just a loan of money, including, as it does, provision by a person of a credit facility to the party—for example, an overdraft—and provision by a third party of security for any such transaction. The donations regime presently requires loans otherwise than on commercial terms to be treated as donations. However, the comprehensive treatment of loans in the new regime means that it is no longer necessary to draw this distinction. Accordingly, all loans will be dealt with under the loans regime alone, thus avoiding the duplicate reporting requirement.
	I should however point out, as I have said, that trade credit is not included in the definition of a regulated transaction. By trade credit I mean the situation where a supplier permits deferred payment to be made in respect of goods or services. Trade credit does not offer the flexibility of a loan of money. It can be offered only by a person or company that is in a position to supply to a political party the particular goods or services it needs at a particular time. Trade credit is a commonplace feature of commercial transactions, but we have no evidence to suppose that a problem exists with the provision of trade credit. If trade credit were to be provided on less than commercial terms, then that would in any event be captured as a donation to the party. This is because the definition of donation currently includes, and will continue to include, the provision of property, services or facilities otherwise than on commercial terms. That is Section 50(2)(f) of the 2000 Act.
	One of the key issues in deciding whether a regulated transaction has to be disclosed will be its value. Disclosure is not required for loans of £5,000 or under unless the combined lending from the same authorised participant exceeds £5,000 during the course of a reporting year, and the regime does not apply at all to loans of £200 or under. New Section 71G of the 2000 Act specifies that the value of a loan is the total amount to be lent; that is, the interest charged is not included. For a credit facility, the valuation is the maximum amount which may be borrowed under the arrangement. For an arrangement involving any form of security it will be the contingent liability assumed by the person who gives the security.
	New Section 71H in our amendments deals with the important question of permissibility. It will not have escaped the notice of Members of the Committee that some of the concern expressed in recent weeks about loans was based on the suspicion that the lenders were from overseas. I do not suggest for one moment that the loans were not perfectly legal, but none the less we believe, as is the case with donations, that a lender should be either an individual whose name is on the electoral roll or an organisation with a sufficient connection to the United Kingdom. New Section 71H prevents a party entering into a regulated transaction with anyone other than authorised participants, the latter being defined by reference to the existing list of permissible donors in Section 54(2) of the 2000 Act. As I said, that restriction will not apply to regulated transactions entered into before the new provision is commenced. There are issues raised about the extent to which EU law may have an effect on that. I suggest to Members of the Committee that we deal with that under the group of amendments in the names of the noble Lord, Lord Kingsland, and the noble Baroness, Lady Hanham—I think it is the next group—when we will have an opportunity to discuss that important issue.
	The permissibility requirement is buttressed by a battery of criminal offences designed to ensure that where the law has been breached the responsible person is punished. For example, where the party takes out loans with unauthorised participants, the party and its treasurer may commit criminal offences. But I make it clear—again, this is dealt with in a subsequent group of amendments—that these criminal offences are committed only on a "knew" or "ought to have known" basis. If the position is that the party or the treasurer neither knew nor ought to have known that the transaction was with an unauthorised lender, he or the party would not be guilty of a criminal offence. Together with the offences, we have made provision to ensure that where a party has entered into a regulated transaction with an unauthorised participant, it should be required to repay the moneys or benefits it derives from the transaction as soon as that comes to light.
	If the party refuses to repay the loan, a broad power is conferred on the courts, exercisable on application by the Electoral Commission, to restore the parties to the position they would have been in had the transaction not been entered into, to the extent that that is possible. That mirrors a similar provision of the 2000 Act which allows the Electoral Commission to apply to court for the forfeiture of impermissible donations. The same principles apply where a guarantee or security is given by an unauthorised participant, with some necessary adjustments.
	Reporting requirements follow exactly the same structure as the reporting requirements for donations. New Section 71M requires regulated transactions to be reported on a quarterly basis to the Electoral Commission. The requirement to report a regulated transaction is triggered when the value of that transaction exceeds £5,000, either in its own right or taken together with the value of other transactions with the same authorised participant. Thereafter, transactions exceeding £1,000 with the same participant must be reported. Weekly reports are required by new Section 71Q to be submitted in the period immediately before general elections, just as is the case with donations. The Electoral Commission is obliged to maintain a register of regulated transactions so reported, which it is obliged to make available to the public.
	A number of changes are necessary in these amendments to reflect the differences between donations and regulated transactions. Most obviously, the particulars that need to be reported about regulated transactions will be different. Transparency requires that the principal features of the transaction should be required to be reported and disclosed to the public. New Schedule 6A requires the identity of the participants to be reported. It also requires the nature and value of the transaction to be reported, together with details of the rate of interest, if any, to be paid on any sums lent, the length of the loan and other particulars. Provision is made for the particulars to be varied, should it become apparent that transparency requires different or additional matters to be reported about regulated transactions.
	The other major difference which requires a different approach from donations is the continuing nature of a regulated transaction. Because regulated transactions involve an ongoing relationship, it is necessary to require the reporting of variations in the terms of the transaction. That we have done in new Section 71N. Whenever one of the particulars that is required initially to be reported about a regulated transaction is varied, the political party is obliged to record the change in the next transaction report. That is necessary to ensure proper transparency; otherwise, for example, regulated transactions could be varied to permit the making of significant further advances or be put on a zero-interest basis in a way that would not be apparent. We have also imposed a requirement to report when a regulated transaction finally comes to an end.
	As Members of the Committee will have noted, my emphasis throughout in explaining what the new provisions will achieve has been on bringing a fuller openness to the activities of political parties in the use of loans and similar transactions. I believe that the provisions in these amendments set out a very comprehensive regime, benefiting as it does from the precedent of the donations regime. I am sure that we will as a result be able to have a very full debate on the issues and principles of the new regime. However, as with the donations regime, it will be necessary to close any gaps by extending the provisions in much the same manner to individual members of political parties, holders of elective office and members associations where the regulated transaction is—as the 2000 Act provides in respect of donations—entered into for that person's "use or benefit in connection with any of his political activities".
	I propose to bring forward amendments at a later stage which will impose the same regime in relation to regulated transactions as we are today discussing for political parties themselves. It will also be necessary to consider the most appropriate means by which to extend the provisions to Northern Ireland. Amendments will be brought forward for that purpose. I apologise for the time that I have taken to disclose those amendments, but they are complicated, long and important. I beg to move.

Lord Kingsland: moved, as an amendment to Amendment No. 1, Amendment No. 2:
	Line 64, at end insert—
	"(13) An agreement or arrangement is not a regulated transaction where the money, credit facility or security arrangement is provided by the bank or other organisation—
	(a) whose ordinary business includes the business of providing money or credit facilities, and
	(b) where the agreement or arrangement is entered into by that bank or organisation in the course of business.
	(14) It is irrelevant for the purposes of this section whether the bank or other organisation carries on business in the United Kingdom or not.
	(15) Subsections (13) and (14) shall not apply where the money, credit facility or security arrangement provided by the bank or organisation is so provided in conjunction or connection with one or more third party transactions which would be registrable under this section if made directly with a registered party."

Lord Kingsland: I should like to thank the noble and learned Lord the Lord Chancellor for his comprehensive introduction and to say at the outset that the Opposition share entirely the objectives of his amendment. The fundamental objective is to achieve transparency and, in our assessment, that is its effect. It follows, therefore, that our amendments are intended only to seek clarification on certain matters.
	Amendment No. 2 seeks to tease out why the Government believe it necessary to include normal commercial banking transactions by banks located in the United Kingdom and subject to the full FSA regime. The noble and learned Lord well knows that the regime is stringent and that it is extremely hard for a commercial bank under its umbrella to behave in any manner other than with the utmost probity. The question that I want to put to the noble and learned Lord is this: does he not think that that is a sufficient guarantee of transparency?
	I give one illustration of why I think the suggestion may be helpful. It is plain that political parties want to have access to the commercial banking system. One of the provisions in the government amendment, which inserts new Clause 71K, refers to a transfer to an unauthorised participant being invalid. That part of the amendment reads as follows:
	"If an authorised participant purports to transfer his interest in a regulated transaction to a person who is not an authorised participant the purported transfer is of no effect".
	Suppose that a reputable commercial bank decided to transfer, by a process of securitisation, an asset—a loan that it has made to a registered party—to an unauthorised party such as a foreign bank. While that foreign bank may itself be completely respectable, the transaction would not be effective under this regime. That in turn might make a perfectly respectable commercial bank located in London more reluctant than it otherwise would have been to transact with a registered party because the asset that it had acquired—the value of the loan—would not be transferable to an unauthorised party. I give that as an illustration of a concern. This matter would have an equal impact on all political parties; I want to underline the fact that in no way am I making a party-political point.
	The noble and learned Lord has already referred to the second amendment in this group, Amendment No. 4. It deals with the way an "authorised participant" is defined. If a bank wishes to be an authorised participant, it must do business in the United Kingdom. The concern I want to raise is simply whether that is or is not consistent with the services provisions in the Treaty of Rome, now contained, I think, in Article 49. I accept entirely that my amendment is cast rather more widely than it ought to have been and I have no desire to contend that companies in general which are not located in the United Kingdom ought to be included in its scope. The only institutions that I wished to include in it were banks; but, as such, my question remains as I have put it. I beg to move.

Lord Goodhart: I start with a brief general comment. The disclosures in recent weeks that very substantial loans made to political parties had not been disclosed because they were or were claimed to be loans made at commercial rates of interest have caused immense damage to public confidence in our political system and particular damage to your Lordships' House by giving the impression that access to membership of this House can be bought. That causes me great concern because your Lordships' House is a very important working part of our parliamentary system. Therefore, I am pleased that the Government, and in particular the noble and learned Lord the Lord Chancellor, have come up with measures that to us seem adequate to deal with the problem. I shall raise one small point in the next group of amendments but, apart from that, we believe that the drafting is adequate.
	I shall deal briefly with the amendments in this group. Subject to any problems arising out of European Union legislation, we could not support any proposal that loans made by foreign banks should not be regulated transactions. That is because loans made by foreign banks that conduct no business in the United Kingdom are much less transparent. It is far more difficult to discover whether money has come from the bank's own available lending pool or whether it has been provided by a supporter of a particular party. However, I understand that it is not the intention of the noble Lord, Lord Kingsland, that such an amendment should be made. Given that, I do not need to say anything further on the point.

Baroness Carnegy of Lour: Perhaps I should have seen this, but what happens if the lender states that he does not want his loan to be repaid? Does it then become a gift? How does the law treat it?

Lord Falconer of Thoroton: I shall deal first with the question put by the noble Baroness. If you say that you do not want your loan to be repaid, it becomes a donation. At that point, the donation provisions in the 2000 Act would apply. I assume, on the basis of the question put to me, that it was a genuine loan until the moment when the decision was made to convert it from a loan to a donation.
	I am very grateful to the noble Lords, Lord Kingsland and Lord Goodhart, for expressing their broad support for these provisions, which entirely reflects what their two respective political parties have said in the consultations that we have had. For convenience, perhaps I may deal now with the points made by the noble Lord, Lord Kingsland. I shall deal, first, with his point on commercial lending and, secondly, with his point on Europe, which I think is the order in which he made them.
	As regards commercial lending, the proposition advanced by the noble Lord, Lord Kingsland—I may have got this slightly wrong—is that where there is, in the ordinary course of business, a legitimate lending by a legitimate lending organisation, such as the National Westminster Bank, why do you need any provision which requires disclosure of that, or, indeed, which prevents such a transaction where the lending bank—because it will almost invariably be a bank—is a foreign bank? Why not just leave that provision out of the regime altogether?
	In support of that proposition, the noble Lord, Lord Kingsland, refers to the proposed new Section 71K and suggests that if an English bank which has your overdraft—although this is hard to believe—seeks to sell a loan to a political party as part of its portfolio of transactions, and then seeks to sell this portfolio to a foreign bank, the English bank would be rather worried because the proposition would not be so attractive if it had some prohibited loans in it. That is the example that the noble Lord gives of what the difficulties might be in relation to this. We have consulted the British Banking Association, which represents 218 banks operating within the UK, but it was not concerned about this point and did not raise it. I would have thought it a matter of very little interest and concern to the banks.
	As far as political parties are concerned, we believe that we have to ensure that there is no distinction whatever between loans of any kind. The moment you allow individuals to make judgments about whether a loan is proper or improper, you introduce difficulties for the political parties. It is far better to have an absolute rule which has to be applied because everybody then knows where they stand and it causes little difficulty.
	If the first of the noble Lord's amendments was adopted, it would apply to every single bank throughout the world—and we cannot be entirely sure, to put it no higher, of the satisfactory nature or otherwise of the banking supervision regimes in other countries. So that is why we do not think the approach adopted in the first of the noble Lord's proposed amendments is sensible.
	The noble Lord has reduced the second issue to whether European Union banks should be put in the same position as British banks. I think that this has been put as a legal question about a level playing field and whether European Union banks should be debarred from lending money to political parties if they do not carry on business here and are registered here, as that would put them in a different situation from British banks. The noble Lord asks whether that would be contrary to the legal position, either under the services directive or in relation to the single market.
	We think that the funding of political parties goes to the heart of the constitutional traditions of the individual member states of the European regime. We believe that it is perfectly possible to balance the constitutional interests of an individual state in determining how its political parties are funded against restrictions imposed, for example, by the services directive. But the noble Lord has raised an important point and we need to consider it further before we come to a conclusion. I should make it clear, however, that we approach the matter on the basis of determining what is the legal regime imposed by Europe.
	I think that that deals with every point that has been raised by noble Lords in relation to the first debate. As to the "small" point raised by the noble Lord, Lord Goodhart, I shall, with his agreement, leave that until he moves his amendments in relation to it.

Lord Kingsland: I am most grateful to the noble and learned Lord. As I said, my amendments are by way of being probing rather than assertive and he has been very generous in the way in which he has responded to them. I do not intend to pursue Amendment No. 2. I take the point about not being absolutely certain of the financial probity of all banks that purport to conduct commercial operations—and there I shall simply let the matter rest.
	As far as the European point is concerned, I am most grateful that the noble and learned Lord is going to reflect further on it. I respectfully suggest that the matter should be approached in two stages: the first question is whether or not there is an obligation on the United Kingdom; and the second question is whether, if there is such an obligation, it is reasonable in such circumstances to activate the public security reservation in the treaty for the purposes laid down by the noble and learned Lord in the last part of his response. That is a matter to which, no doubt, we will return on Report. In the meantime, I beg leave to withdraw the amendment.

Amendment No. 2, as an amendment to Amendment No. 1, by leave, withdrawn.

Lord Goodhart: moved, as an amendment to Amendment No. 1, Amendment No. 3:
	Leave out lines 85 to 87.

Lord Goodhart: In moving Amendment No. 3, as an amendment to Amendment No. 1, I shall speak also to Amendments Nos. 7 and 11. These are the only amendments to the new legislation we have tabled. Their purpose is to remove the exemptions provided for loans made by individuals or corporate bodies who are not permissible donors if those loans were made before the commencement of the proposed new Part 4A of the 2000 Act, which I shall use with the same meaning as that used by the noble and learned Lord the Lord Chancellor.
	These amendments are not intended to apply to loans made by unauthorised persons if they are repaid before commencement—we are happy with that. However, we believe that loans made by persons who are not allowed to make donations should be repaid before the commencement of the new Part 4A and, if not repaid by then, they should be both disclosed and subject to the provisions for compulsory repayment. That would bring these provisions into line with the rules for the disclosure of loans made by people who are permissible donors. The identity of the lenders, if they are permissible donors, does not have to be disclosed if the loans are repaid before the commencement date—we accept that—but they must, under the new Part 4A, be disclosed if the loan is outstanding at the commencement date. To that extent, these provisions override any confidentiality provisions in the loan agreement.
	The reason behind this, no doubt, is the realisation that accepting loans from permissible donors in order to avoid disclosure is contrary to the spirit behind the 2000 Act and, if the loans are outstanding at the date of commencement, they must be disclosed. Accepting loans from people who are not permissible donors is doubly contrary to the spirit of the 2000 Act because it avoids not only disclosure of the identity of the person who made the loan but the ban on financial assistance by persons who are not permissible donors. We believe that it is right, therefore, that if such a loan is not repaid before the commencement date of the new Part 4A, the loan agreement should become void and there should be an obligation to make immediate repayment.
	It is not the amendments' intention to make retrospectively entering into the original agreement with the person who is not a permissible donor into a criminal offence. That would be wrong in principle and contrary to Article 7 of the European Convention on Human Rights. But we believe that imposing the obligation to repay would be legitimate in the same way as an obligation to disclose the names of the lenders who are legitimate donors is legitimate. We believe that the two would be equally justified. Why have the Government not taken this line in respect of loans from people who are not permissible donors? I beg to move.

Lord Falconer of Thoroton: The noble Lord, Lord Goodhart, puts the matter clearly and I agree with his analysis of the framework. In these provisions we are requiring loans existing at the time the provisions come into effect to be disclosed. We are requiring that even if, prior to the implementation of this legislation, any arrangement about confidentiality had been made. To that extent, we would be overriding an agreement made, assuming that it was made in good faith before the Act came into force. The noble Lord urges us to go one step further and say that even though the contract was entered into in good faith pursuant to no illegality persisting at the time, we should declare those loans not only disclosable but also void as being illegal because they were with an impermissible donor, namely somebody foreign.
	The consequence of the loans being declared illegal would be twofold: first, the terms on which they were repayable would be changed, which might be of detriment to the lender and to the political party. Encapsulated in that is the second effect: in practice they would become repayable immediately rather than over time. That is much more far-reaching retrospectively than simply requiring the loans to be disclosed, even though that might arise in connection with putting aside a confidentiality agreement entered into in good faith.
	We think the balance is best struck by requiring disclosure but not requiring what may wreak havoc with a party's finances or cause significant prejudice to the individual lender. So although I understand entirely what the noble Lord, Lord Goodhart, is arguing for, our view is that the right balance is struck by providing for disclosure, irrespective of retrospectivity, but not rendering those agreements void, which is what the noble Lord is arguing for in practice.

Lord Goodhart: I am grateful to the noble and learned Lord; however, this is a significant issue. Although we now know a considerable amount about the identity of the donors—or the lenders—we have not had clearly put to us any significant cases in which loans have been made by non-permissible donors at a level which would cause a party serious embarrassment. That being the case, I think that the argument in favour of including our amendment is quite strong. Although we will consider the noble and learned Lord's response, we may well wish to bring back this proposal at Report. I beg leave to withdraw the amendment.

Amendment No. 3, as an amendment to Amendment No. 1, by leave, withdrawn.
	[Amendment No. 4, as an amendment to Amendment No. 1, not moved.]

Lord Kingsland: moved, as an amendment to Amendment No. 1, Amendment No. 5:
	Line 95, after "which" insert "the registered party is aware that"

Lord Kingsland: In moving Amendment No. 5, I should like to speak to Amendments Nos. 6, 9 and 10 as well.
	The amendments refer to two sets of situations. The first concerns loans made between a registered party and an unauthorised participant; the second concerns guarantees between registered parties and unauthorised participants. In both cases, the situation might concern either a transaction between a registered party and somebody who is, ab initio, an unauthorised participant or a transaction between a registered party and a person who was initially an authorised participant but subsequently became an unauthorised participant. The consequence in all these cases is that once the participant with the registered party is unauthorised, the transaction is void and there is an obligation on the registered party to repay immediately. If that repayment is not made immediately, then there are other remedies that, for example, the Electoral Commission can take.
	Our amendments simply say that the remedial measures should be taken only when the registered party is actually aware that the transaction is either unauthorised ab initio or has become unauthorised subsequently. I accept that a transaction between a registered party and an unauthorised participant at the beginning is likely to be extremely rare. However, the circumstances in which a transaction which is initially legal under this Act subsequently becomes illegal because an initially authorised participant becomes an unauthorised participant are likely to be more frequent. Plainly, there will be occasions, for example, in which an authorised participant, such as a bank doing business in the United Kingdom but subsequently deciding to cease to do so, may take that decision without informing the registered party. It might become obvious to the registered party only several weeks or even months later that it is now a party to an illegal loan or guarantee agreement. In those circumstances, because interest will be triggered from the first day that the authorised party becomes an unauthorised party, I think it only fair that a knowledge factor should be inserted into the legislation. I beg to move.

Lord Falconer of Thoroton: The noble Lord, Lord Kingsland, accurately describes the effect of the proposals that the Government are advancing. It is worth emphasising the following points, which I hope the noble Lord will accept.
	The main method of enforcement is criminal proceedings. Before any criminal offence is committed, the relevant prospective defendant has to know, or ought to have known, that the offence was committed. The amendment that the noble Lord is advancing at this stage of the debate is nothing to do with the criminal offences but with when the void impact occurs. He rightly says that where the participant was unauthorised from the very beginning, the transaction is void from the very beginning, irrespective of whether the political party knew, or ought to have known, that the person was an unauthorised participant. Where, under the existing amendments, a participant who was authorised later becomes unauthorised, the transaction only becomes void at that stage.
	The noble Lord argues in his amendment that the transaction should become void only at the point when the political party knew or ought to have known that the participation was unauthorised. That would be neither sensible nor possible. The sections with which we are dealing do not place any form of obligation on the party to do something until it knows what the position is. It is true that new Section 71I(3) requires the treasurer to repay any moneys lent under the void transaction. Had we not made this clear, the common law may have left losses to lie where they fell. Had this been the case, it would have had the perverse effect of allowing the political party to retain any moneys lent as a de facto donation.
	The obligation to repay imposes no time limit. It is necessarily implicit that this obligation could be discharged only when knowledge of the transaction and the unauthorised participation came to the attention of the party. Moreover, the amendment would unnecessarily complicate the operation of these provisions. At present, all one needs to do is to look whether, at the material time, a party to the transaction was an unauthorised participant. This would be readily ascertainable. However, were this amendment to be accepted, it would be necessary additionally to consider the precise point in time at which the party became aware, queried, or ought to have become aware that this was the position. Although a knowledge test is appropriate before criminal liability is imposed, which is the position under the Bill, this additional requirement of knowledge which the noble Lord proposes does not strike the right balance in determining whether a party should be deprived of the benefit of an agreement that should never have been concluded in the first place.
	Although I fully understand the reasons behind the amendment, it is not appropriate for the reasons that I have given. I therefore invite the noble Lord to withdraw his amendment and never to return with it.

Lord Oakeshott of Seagrove Bay: As a non-lawyer, perhaps I may ask the noble Lord, Lord Kingsland, whether he is really serious in proposing this amendment. Are we seriously suggesting that the Conservative Party or another reputable political party would take loans from institutions that are so fly-by-night that they might suddenly close their doors and stop operating in the UK? I advise him to follow the advice of the Lord Chancellor and to stick to the NatWest.

Lord Kingsland: I said in my opening speech on the amendment that I thought that the circumstances in which a registered party would transact with an unauthorised participant ab initio would be extremely rare; but there may be occasions—particularly if the Government consider my European amendment on Report and come to the conclusion that any European bank ought not to be entitled to be an authorised participant—when a bank decides to cease business in London, because, for example, the FSA regime proves too onerous. In those circumstances, a registered party might legitimately be unaware for several weeks, or perhaps even months, that the participant ceased to be authorised. So there are circumstances in which the set of facts that I am confronting make sense. However, I entirely understand both the reasons which the noble and learned Lord gave for being disinclined to accept my amendment and the reasons behind those reasons. I shall certainly not press it today, although I shall reconsider it between now and Report.
	I entirely agree with the noble and learned Lord that the most important section of the Bill relating to transactions with unauthorised payments is that which deals with criminal offences. The only reason why I did not table amendments to that section first was that it comes after this section. I certainly do not dispute the Lord Chancellor's judgment about the importance of those provisions. I beg leave to withdraw the amendment.

Amendment No. 5, as an amendment to Amendment No. 1, by leave, withdrawn.
	[Amendments Nos. 6 and 7, as amendments to Amendment No. 1, not moved.]

Lord Kingsland: moved as an amendment to Amendment No. 1, Amendment No. 8:
	Line 132, at end insert—
	"( ) Where interest is rolled up under such a transaction, this does not constitute a new regulated transaction for the purposes of this Part."

Lord Kingsland: I can deal with this amendment exceedingly telegraphically. It would simply clarify the last part of proposed new Section 71H, entitled "Authorised participants". The amendment states:
	"Where interest is rolled up under such a transaction, this does not constitute a new regulated transaction for the purposes of this Part".
	In other words, if a loan is extant and, after the proposed new section becomes law, the loan is rolled over, does this make it a new transaction? I beg to move.

Lord Goodhart: I must confess to being a little surprised by this amendment because if it is agreed that some interest, on becoming payable, should be rolled over rather than be paid then and there, it is extending further credit and is plainly a new transaction.

Lord Falconer of Thoroton: I understand the concern of the noble Lord, Lord Kingsland. He is concerned with capitalisation—the adding of accrued interest to the total sum outstanding on a loan. He is saying that it would be unduly burdensome to require the capitalisation of interest, which might occur frequently during the lifetime of a loan, to be treated as a separate regulated transaction. I do not think that the regime would require this, but the treatment of capitalisation under the new regime depends on whether the regulated transaction initially provided for capitalisation or rollover, or on whether the regulated transaction was later varied to provide for it.
	Where the regulated transaction originally provided for capitalisation, the operation of the capitalisation provision would not be treated as the making of a fresh regulated transaction. Rather, the capitalisation provision would amount to a term of the original transaction that would affect its overall value. The difficulty about that approach is in relation to what value one gives to the loan at the beginning, if one of the terms is that unpaid interest can be rolled over or that one is allowed to roll it over.
	Where a regulated transaction which did not originally provide for capitalisation is varied to provide for capitalisation, this change would obviously have to be reported under the continuing reporting requirement in new Section 71N. This is because such a variation provides for the value of the transaction to be increased. The requirement to report changes applies where a variation is made to the particulars that are required to be reported in the original transaction report. A change in the value of a regulated transaction is such a change.
	I can also confirm that where a regulated transaction which existed at the time of the commencement of the new regime provided for capitalisation, such a transaction would be exempt from the permissibility requirements. The operation of the capitalisation provision at a later stage, after the new scheme has commenced, will not bring the pre-existing transaction within the scope of the permissibility requirements.
	I hope that I have reassured the noble Lord, Lord Kingsland, that the operation of a capitalisation provision will not, therefore, give rise to a fresh regulated transaction. However, his amendment has helpfully raised the question of whether agreements for capitalisation give rise to difficulties in valuation. A capitalisation provision will mean that the overall value of the total amount to be lent at the outset will, to a limited extent, be unclear.
	Although the initial capital to be lent will be readily ascertainable, the amount that may be added will depend on how the capitalisation provision is in fact operated during the lifetime of the loan. So, for example, the agreement may provide that interest will be capitalised only if it is not paid within 30 days of accrual, but that if a party always pays the interest within the 30-day limit no sums will be capitalised during the lifetime of the loan. The value that it adds to the transaction will accordingly be variable. This will not be a problem where the initial capital extended clearly exceeds the reporting threshold of £5,000. Whatever the true value of the loan, it is clearly one which must be reported but it could conceivably give rise to difficulties in a narrow category of cases where, say, a loan for £4,000 provides for capitalisation. It is not right that there should be a doubt about whether this is a transaction that is required to be reported. In the light of the amendment, we need to consider how to deal with the capitalisation issue. We will either end up with a difficulty of valuation, which satisfies the point made by the noble Lord, Lord Kingsland, on the need for not too many transactions to be disclosed but does not deal with the difficulty of valuing the transaction, or we do not satisfy the noble Lord, Lord Goodhart, because he would like all the transactions to be disclosed. We need to take that one away and think about it a bit more.

Lord Goodhart: Perhaps I may ask the noble and learned Lord, Lord Falconer, to consider one issue. I can understand that where the borrower has a right under the agreement to have the interest rolled up, one can regard that—to start with, at any rate—as one of the terms of the original loan agreement. On the other hand, if there is no such right and the lender and borrower agree a couple of years later that some interest should be capitalised, I would have thought that that is plainly a new agreement.
	There is a possible intermediate situation, where the borrower has a right to have the interest capitalised but the lender also has a right to call in the loan on, let us say, one month's notice. In that case, it could certainly well be argued, and probably correctly, that by not calling in the loan itself, but allowing it to be carried over and the interest to continue to be rolled up, the lender was in fact extending additional credit to the borrower at that date, simply by not calling in the loan.

Lord Falconer of Thoroton: What the noble Lord, Lord Goodhart, said simply underlines the fact that some more thought is required concerning the detail of that clause. It would be useful for us to have a discussion before Report because we are not that far apart in what we are trying to achieve. It is a difficult issue that needs to be resolved. I take the noble Lord's point; further thought is required on it. With further discussion, I hope we can resolve it before Report.

Lord Kingsland: I need make no apology whatever for tabling my amendment. The noble and learned Lord's response was both painstaking and illuminating. I am most grateful to him and I beg leave to withdraw the amendment.

Amendment No. 8, as an amendment to Amendment No. 1, by leave, withdrawn.
	[Amendments Nos. 9 to 11, as amendments to Amendment No. 1, not moved.]

Lord Kingsland: moved, as an amendment to Amendment No. 1, Amendment No. 12:
	Line 193, at end insert—
	"( ) It is a defence for the treasurer to prove that he took all reasonable steps to ascertain the matters mentioned in subsection (2).

Lord Kingsland: We now come to the criminal offences to which the noble and learned Lord, Lord Falconer, referred in response to an earlier amendment. I am looking particularly in my amendments at new Section 71L(12) and (13), which deals with the state of mind of a party treasurer in relation to an issue which your Lordships have been discussing earlier: an authorised participant. The crucial words in the noble and learned Lord's amendment are,
	"knew or ought reasonably to have known".
	In tabling my amendments, I might have simply sought to strike out the expression "ought reasonably to have known" because we are dealing with a criminal offence and the normal rule is that there has to be subjective knowledge before proof of mens rea. "Ought reasonably to have known" clearly falls within the category of negligence and therefore, as a matter of principle, ought to have no place in the criminal provisions of the statute.
	However, I have adopted the different approach of using the expression contained in the amendments. Although the regulations have not been made, as I understand it, the character of the registered party depends entirely on the structure of the political party. There may be one treasurer for all activities of the party, which include what happens not only at the centre but on the periphery. Or there may be a large number of treasurers, many of whom are doing the work voluntarily and part time. It is important, therefore, to take account of the level of knowledge and the degree of professionalism that a treasurer might have in relation to transactions with authorised persons. It is with that very much in mind that these amendments are tabled. I beg to move.

Lord Goodhart: I have to confess that I am a little puzzled by the amendment tabled by the noble Lord, Lord Kingsland. If a person takes all reasonable steps to ascertain the matters mentioned in subsection (2) and has not ascertained them, then that person cannot be said to be somebody who ought reasonably to have known of the matters mentioned in paragraph (b). But the distinction here is that under new Section 71L(2)(c) the burden of proof is on the prosecution. The prosecution has to prove beyond reasonable doubt that the person ought reasonably to have known of the relevant matters, whereas under the noble Lord's amendment the burden of proof—admittedly to the lower standard, on the balance of probabilities—is on the defendant. The amendment is inconsistent with what is left in the new government amendments and is actually less favourable to the defendant.

Lord Falconer of Thoroton: I completely agree with the noble Lord, Lord Goodhart, particularly on the burden of proof. This is less favourable to the defendant. The prosecution has to prove beyond reasonable doubt either knowledge or that the individual "ought reasonably to have known". This defence would have to be proved by the defence on the balance of probabilities. I adopt all that the noble Lord, Lord Goodhart, has said and have nothing to add to the brilliant way in which he said it. I, therefore, invite the noble Lord, Lord Kingsland, to withdraw his amendment.

Lord Kingsland: The noble and learned Lord, Lord Falconer, may have no fear: I will certainly withdraw my amendment for now. But with great respect to the noble Lord, Lord Goodhart—and therefore by inference to the noble and learned Lord the Lord Chancellor, who adopted in its entirety the judgment of the noble Lord, Lord Goodhart—there is a great deal of difference between the two amendments. My amendments require that the treasurer takes all reasonable steps for a treasurer in his position. In my view, that is a much more generous test for the treasurer than the test laid down by the Government, which is "ought reasonably to have known".
	I find it a real jurisprudential challenge to be up against both the noble and learned Lord and the noble Lord; but it is one I am quite prepared to take on and shall return to on Report. In the mean time, I beg leave to withdraw the amendment.

Amendment No. 12, as an amendment to Amendment No. 1, by leave, withdrawn.
	[Amendments Nos. 13 to 17, as amendments to Amendment No. 1, not moved.]

Lord Goodhart: I want to ask one short question on Amendment No. 1. Does the noble and learned Lord agree that Parts 4 and 4A are not cumulative, so that it would be possible, without disclosure, for any individual who was a permissible donor to make in the same year both a donation of £5,000 and a loan of £5,000 without having to disclose either of them? If that is correct, ought there not to be some method of accumulating the two so that in those cases there would have to be some disclosure?
	We are talking of £10,000, which I recognise is not enormous compared with some of the sums that have been lent. However, I wonder whether the point has been considered and, if not, whether it should be.

Lord Falconer of Thoroton: Plainly, we need to consider that point because if £5,000 is the kick-in level for disclosure, it is very difficult to see a reason why, if you gave £4,999 as a loan and another as a donation, it should not be disclosed. We need to consider that point, but I do not know what the answer is at the moment.

On Question, Amendment No. 1 agreed to.
	Clause 73 [Extent]:

Lord Falconer of Thoroton: moved Amendment No. 18:
	Page 71, line 24, at end insert—
	"( ) section (regulation of loans etc.);"
	On Question, amendment agreed to.
	Clause 73, as amended, agreed to.
	Schedule 1 [Amendments]:
	Lord Falconer of Thoroton moved Amendments Nos. 19 and 20:
	Page 98, line 34, at end insert—
	" (1) Section 50 (definition of donations for the purposes of Part 4) is amended as follows.
	(2) In subsection (2), omit paragraph (e).
	(3) In subsection (4)—
	(a) omit paragraph (a);
	(b) in the words following paragraph (b), omit "the loan or"."
	Page 98, line 36, at end insert—
	" (1) Section 53(4) (value of donations) is amended as follows.
	(2) For "section 50(2)(e) or (f)" substitute "section 50(2)(f)".
	(3) In paragraph (a)—
	(a) omit "the loan or";
	(b) omit sub-paragraph (i) and the "or" following it."
	On Question, amendments agreed to.
	Schedule 1, as amended, agreed to.
	Schedule 2 [Repeals]:
	Lord Falconer of Thoroton moved Amendments Nos. 21 and 22:
	Page 100, line 50, column 2, at beginning insert- "Section 50(2)(e).
	In section 50(4), paragraph (a) and the words "the loan or"."
	Page 100, line 52, at end insert—
	"In section 53(4)(a), the words "the loan or", sub-paragraph (i) and the "or" following that sub-paragraph."
	On Question, amendments agreed to.
	Schedule 2, as amended, agreed to.
	House resumed: Bill reported with amendments.

Northern Ireland Bill

Standing Order 47 having been dispensed with, Report received.
	Read a third time, and passed.

Lord Davies of Oldham: My Lords, I beg to move that the House do now adjourn during pleasure until 7.35 pm.

Moved accordingly, and, on Question, Motion agreed to.
	[The Sitting was suspended from 7.07 to 7.35 pm.]

Royal Assent

Lord Brougham and Vaux: My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Act:
	Northern Ireland Act.

House adjourned at twenty-four minutes before eight o'clock.